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CultivatingCredit
Posts: 6
Registered: ‎09-28-2012
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When to pay Credit Card for best Utilization

Hi Forum! 

 

Over the last 5 years I have had the opportunity to build up my credit from scratch, but the answer to one question still evades me no matter what forum I am looking at (though maybe I am missing it). 

 

When should I pay my balance? I have roughly 3-4 cards in use and I keep the aggregate amounts and the individual under 10% usage. I have read on many websites conflicting information, which I will list below to hopefully make my question clear. 

 

1. "Companies report balances at any given time" vs "Companies report your closing statement". 

 

2. "It is better to let your statement close with 10%-30% of your available credit used" vs "Pay your balance down to 0% before the statement closes".

 

3. "Always make sure your total usage for the month is below 30%" vs "Never go above 30% for your total purchases for the month" 

 

These obviously revolve around the same question, but I just wanted to clarify the information I am looking for. 

 

 

Thanks!

 

Valued Contributor
my-own-fico
Posts: 1,299
Registered: ‎01-05-2010
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Re: When to pay Credit Card for best Utilization

The only utilization number that matters is zero. To the best of my knowledge, there is no other verified cutoff that carries any particular importance. As a general rule, a lower utilization is better; keep a small balance on one card and the rest at zero (pay down the balance before the statement date). When that is said, my current Experian FICO score is based on a credit report that has a positive balance on two cards and has a double-digit overall utilization. :smileysurprised: :smileyvery-happy:

Are you living within your means?
Established Contributor
jamie123
Posts: 924
Registered: ‎03-22-2012
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Re: When to pay Credit Card for best Utilization

Welcome to the forums!

 

Okay...Let me preface this by saying, "You only need to do this for 2 reasons, one, you will be applying for NEW credit within the next 30 to 60 days, two, you want to see how high you can get your scores." This is how to groom your scores to be their best:

 

You want 1 card to report a balance that is less than 9% of ALL your credit cards' credit lines and all the rest of your cards to report a zero balance. Lenders report your credit card balance anywhere from the payment due date to 3 or 4 days after the payment due date. You need to go online and pay your cards accordingly to set-up these reporting balances. So for the reporting card you would go online a few days BEFORE the payment due date and pay down the balance to less than 9% of all your CC's CLs. You cannot use this card again until 5 days after your payment due date. This insures that the CCC will report the balance you have set-up. You do the same thing for the rest of your cards except you need to pay those balances down to zero. The actual percentage to give you your absolute highest score could actually be any of the reporting percentages from 1% to 9%, it varies by individual. If you pay all your cards off in full your scores can actually be 5 to 12 points lower than if you allow 1 card to report a small balance. Doing this could actually save you thousands of dollars if when applying for a mortgage those 5 to 12 points kicked you into the next lower interest rate group.

 

The answers to your questions more directly are as follows:

 

1. Companies report balances anywhere from the payment due date till the payment due date + 4 days.

 

2. You want 1 card to report less than 9% and all other cards to report zero. If you actually had 2 cards reporting just $5 each you would loose a few points. For each additional card more than the first card that reports a balance, FICO subtracts a few points.

 

3. You can use your cards as much as you want, it is the REPORTING balance that counts. You could max out your cards every month as long as you paid the balances down before the payment due date.

 

I hope that was clear enough?



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Regular Contributor
localuser
Posts: 167
Registered: ‎09-07-2012
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Re: When to pay Credit Card for best Utilization

If you have a card with 9% at time of payment wont you need to pay interest?  I am new to all this so this is a great subject for me to learn

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Established Contributor
jamie123
Posts: 924
Registered: ‎03-22-2012
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Re: When to pay Credit Card for best Utilization


localuser wrote:

If you have a card with 9% at time of payment wont you need to pay interest?  I am new to all this so this is a great subject for me to learn


No. You just need to pay at least that amount (The reporting balance) BEFORE the next month's payment due date.

 



Starting Score: EQ 658 6/18/12
Current Score: EQ 690 11/17/14 - EX 687 7/21/14 - TU 682 7/21/14
Goal Score: EQ 720+
Take the FICO Fitness Challenge

Regular Contributor
localuser
Posts: 167
Registered: ‎09-07-2012
0

Re: When to pay Credit Card for best Utilization

So just pay the minimum due currently it was 10 bucks but her balanace was like 125.

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