Re: Newbie Question..
[ Edited ]
11-13-2012 03:27 PM - edited 11-13-2012 03:36 PM
it honestly doesn't matter to use your credit card if you use it 100 times a month or 1 time a month or let alone once every six months to keep it in open status. Your scores will rise regardless....
You should every expense you can on a credit card not for a better credit score cause it won't make a difference how much you spend, the main thing is if you are a responsible consumer or not. If I charge a order of fries every month on a credit card it won't make a difference to my score vs someone who made over 10,000 transactions in one month for your fico score. although this could possibly help with your internal scoring with companies like Chase and Amex, but for Fico it does not.
You should use every expense you can cause it's a clean documentation and proof in case you lose a receipt, and things are more disputable. also with things with good credit cards like 90 day price match protection, reward points/cash back , travel insurance, car rental insurance etc.
Your Fico score only cares if you pay on time, and carry a low balance. Although in a manual review if they see the highest limit ever charged was $1 on a $10000 limit they might wonder what the heo? lol
If your statement is sent out on the 17th just pay your balance before it cuts at 15th to lower your chances you'll get a high balance reported. Remember somecompanies will post your spending anytime they wish.
personally I pay mine within few hours to 4 days of a big purchase. Just make sure you don't spend more than you can afford to pay off and your fine. even if you wreck your Fico by charging up 100% of your limits one month it won't matter in the following month if you pay itdown. just make sure to lower your balance a month or two before a big purchase like a car loan or a mortgage and you'll be fine. (or before apping for another credit card)
If my credit is at 100% limit for a year with minimum payments and pay it down as long as companies don't lower my limits or close my cards as high risk your fico score won't be any different then someone who pays 100% of their spending 1 minute after the transaction.
I got my scores upto what it is now from doing what I do,with only maybe 2 charges a day on average if that. I pay it off so I don't have to pay any interest fees within their grace period and I'm set to go. Although my Fico's about to do a nose dive from charging $15,000 on a convience check to buy a house that's "cash offer only" lol but I'm not worried cause that's my low interest oh sh it card to balance transfer at 5-6% interest rate it's stil lower than most people's 2005-2007 mortgages.
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.
total credit limits $108,400 Credit scores Ex 728 EQ 738 TU 758