@Anonymous wrote:Oops! I'll try to get it right this time.
I have recently paid off all of my debts (including my home) except for a loan I have for a 1/2 acre lot and a very old school loan. But i no longer have any credit card or department store card debt. I recently accidently used one of the credit cards for an online purchase but paid it out within a few days when i realized what happened. It seems consequently to that action that my score has gone up another 6 point. I am at 761! So my question is this, was it the use of that card and immediate payment that made the score jump? If so should i continue to use one or more of my credit cards and just pay the balance in full each month? Which should i use then, the one with the highest limit or the one with the lowest rate? I would love to hit 800 at least for one day of my life and I really do want to live debt free and hope to begin operating on a cash basis only. I would appreciate any advice you can give me on this matter. Thx.
Hi Clk, welcome!
Sounds like you are doing very well. It is NOT a bad thing to use credit cards, as long as you are responsible with them. If you listed more information about your cards (how many you have, where from, CL on each one), more specific advice could be given. However, generally, you should allow one card to report a balance and the others should be used once a month (or once every other month) and paid off right away. The one that DOES report can still be PIF though, just pay when you get the bill, then charge something small before the statement cuts (I do it like this: my bill is the 28th, so I pay in full that bill, then I charge something small (gas, groceries, etc, under $100) and then that amount is reported to the CRA on the statement that comes on the 5th...thus I pay no interest but I'm "using" the card.) By doing this, it doesn't matter which card you use, since you'll be PIF (and ideally, you'd use them all and pay them all off with no interest accuring) and you'll see a score boost since you'll be using the cards.
Also, consider adding a reward card into the mix, it'll give you cash back so you'll bascially be paid to use their card!!
CC aren't the enemy and cash isn't king... good luck!
Starting Score: 799
@Anonymous wrote:
Peach, can you elaborate a little more on this strategy? I have 3 CCs that I want to rotate through. They have a CL of 20k, 4k, and 6k. As an example, one recent statement for the CL$4k card says the period covered is June 9- July 8 2009. The due date for payment is Aug 3 2009. What date should I PIF and what window of time do I have to make the small purchase on the card assuming it's this one I want to report this month? Based on the fact people with high FICOs seem to maintain a utilizatoin ratio of around 7-8%, should the maxium I charge for the extra reporting charge be no more than $320 (8% of $4000)? The card with a CL$20k has the best interest rate. Is it ok if I use that as my primary and then just use the other two like once a quarter? Or should I rotate through all three, one new one every month? Thanks for your time.
Hi Honorary,
Creditwherecreditisdue answered you partially but I thought I'd throw in my own reply =)
For the dates you gave me, you should PIF on 8/1 (I always give it a few days to make sure nothing gets messed up and you get socked with a "late"). Then, between 8-3 and 8-8, charge up to 7% util (although really, you can charge up to 9% and that's ok) and whatever that amount you charged is will be what is reported.
However, the other trick is that you want to have less than 50% of your TL reporting. So if you have 3 cards AND a mortgage AND a car loan...that's 5 items and you would already have the mortgage and the car loan reporting, meaning NO credit card should report ANY balance (although that is debatable, but if you do have this situation, try to keep util <3%).
Also keep in mind - if you always PIF the interest rate does not matter. Therefore, use the card with the best reward or whatever one you like best (unless you are worried about not always being able to PIF, in which case the lowest interest rate is the best to use). I don't know what banks the cards you have are with and some big banks like to see you use their cards more than once every 3 months so I'd probably use and PIF immediately something small on two cards and use the above strategy for the third card.
Hope that makes sense, feel free to post a follow-up question and someone will be able to help if I forget to look for two weeks ;-)