Re: Newbie Question..
11-13-2012 03:05 PM
Okay...I'm going to try and explain this as clearly as I can. It is very important that you understand this and if you don't understand something please ask me to clarify it further.
The way you use and pay your CCs has a HUGE impact on your scores. You need to use each credit card EVERY month and control the balance that reports to the CRAs each month. This is especially important to someone as yourself that has a very short period of time to work with before an anticipated new credit application in February.
1. Use each credit card every month as much as you can. You want to try and transfer as much of your daily living expenses onto your credit cards as possible. YOU DO NOT WANT TO BUY ANYTHING THAT YOU DON'T HAVE THE MONEY TO PAY FOR ALREADY SITTING IN THE BANK! Think of your credit cards as debit cards with a slight delay built in. Use them for gas, groceries, cell phone bills, McDonald's, etc. Doing this shows the lender that you are using their card and will pave the way for CLIs in the future. It helps you to establish credit history and demonstrates good credit behavior.
2. Utilization (UTI) accounts for 30% of your score. You have direct control of 30% of your credit score! You need to pay your balances TWICE each month to be able to control your reporting balance. What is the reporting balance you ask? The CC companies report your account balance once each month to the CRAs. The reporting date varies from your payment due date, up to your payment due date + 3 to 4 days, so you need to control the balance on your card for this approx. 1 week period each month.
An example: Say your payment due date is the 20th of November. You want to go online a few days early, say the 17th of November and ALMOST pay your balance down to zero. Leave a balance of $10 to $30 on the card so your reporting balance will be $10 to $30. You now cannot use this card for new purchases until 5 days AFTER the payment due date. Just switch to using another card that has a different payment due date for this 1 week time period. Sometime after your new stement cuts for this account stop back and pay the $10 to $30 dollars off to take the balance to zero and start using the card again. You need to do this with each card every month, and it is a PITA, but your scores will benefit because of it.
If you are planning on applying for NEW credit, you want only ONE card reporting a balance and the other cards reporting zero before applying for the NEW credit.
Starting Score: EQ 658 6/18/12
Current Score: EQ 680 9/23/13
Goal Score: EQ 720+
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