Hey guys. I'm rebuilding my credit and was just wondering if anyone else recommends the approach of paying off all credit cards, and only using one credit card. Or should I make small purchases on each CC per month and just pay the bill in full each month? Thanks.
Whats up JM - Thanks for the info. This helps. I follow the same pattern pretty much, but am working to pay down my CC's with a balance and just keep one with a low balance (10% or less) . This really makes me think twice about my spending and follow my 2-week rule. Wait at least 2 weeks before I buy something I think I really want.
Interesting, I only have 3 credit cards and this week I paid all 3 in full.
I currently owe nothing. Is it wise to leave it like this?
If all you have is 3 CC's across the board, and they're all paid in full, I would recommend keeping a small balance (maybe as low as $10 or as high as $100 depending on your credit limit) on just ONE card. Just keep your ult. to 9% or less of your available credit (use coupons and never pay full price if you can manage it.) Continue to pay the rest of your CC's in full. While it's good to show that you can pay the bills in full every month, FICO likes to see that you can manage a revolving credit balance, on time, every time. That can add points to your score.
Congrats on paying off all your cards.
@Splurge wrote:Interesting, I only have 3 credit cards and this week I paid all 3 in full.
I currently owe nothing. Is it wise to leave it like this?
The important question is when did you pay them? If you paid after they reported, you're scored as if you have balances. If you paid before they reported, so that they show $0 balances, you'll be scored that way. If you paid after they reported, but you don't use them again before the next reporting date (not wise, see below), they will all report $0 next time around.
If you enjoy torturing your reports to wring out as many points as possible (as I do, and as many here do), do this:
- keep using each card during the month --you don't want the lenders to close you down for inactivity
- pay them off before they report, except for one
- let that one report some token amount: maybe $20 if your total credit limits are low, or even the full amount if your total credit limits are high enough to keep you in very low revolving utilization territory (4% or under, for instance0
- after that one card reports the balance, don't forget to pay it off before the due date --this is amazingly easy to do!
As to when cards report, almost all report the evening of your statement date (NOT the due date), reporting the balance that shows on the statement. All US Bank cards and HSBC/ Orchard bank cards, as opposed to store cards like the Best Buy store card, report your balance as of the last business day of the month. And there are doubtless some other cards out there that vary from this, but this is certainly the pattern for the overwhelming majority of cards.
Most people (not all) will see a drop in scores if all revolving accounts report $0. That's the reason for the advice to let one post. I found that once my scores hit their current range, EQ penalizes me for having all with $0, but TU gives me a few points. Go figure.
@Aim720 wrote:This is what I hate about credit scoring..why should I HAVE to use my credit card? (I already know the answer)
I know, I know.
The answer, as you know - but others may not yet, is that you don't have to use your cc, you get to choose whether or not to do that. And more importantly, for FICO credit scoring, you don't have to accumulate debt on your CC's or use them heavily.
But FICO is a predictor of future behavior and the data shows that those who use credit in certain ways are less likely, statistically, to default.
So if you want the benefits of a high FICO (and you may not care), then it's helpful to show you're low risk by putting in the effort to handle credit responsibly.
Does DS have to put in all those hours of driving with his driver's permit? No. But if he wants the benefits of having a driver's license or the use of my vehicle, then he has to put in the effort to handle driving responsibly over time - then the state (and I) know what his track record is and can grant him his driving privileges accordingly.
If I was handing out large sums of money for, let's say, a mortgage - I would very much want to know how effectively the guy I was giving the cash to had handled credit in the past. If he didn't exhibit (not just claim) good credit behavior, I would assume my risk was higher and would charge for that additional risk.
So, for now, I'm more than happy to show my creditworthiness through my behavior - that makes me more visibly responsible to folks who I'm going to depend on to help me through life.
Very well written beammeup. I enjoyed your post. By the way, my score shot up 10 points. Yes!!!!!!!!!!!!!!!!!!!!!!!! My secret: SELF-CONTROL, DILIGENCE AND EDUCATION. I run professional marathons as part of my lifestyle, and love what willpower does for the race. I'm learning how to use that same willpower to improve my FICO.