Frequent Contributor
Posts: 385
Registered: ‎02-06-2009
##### Re: Newbie Question......

I think there's some confusion in this thread, so let me try to clarify with a couple of points.

• You ALWAYS want to make a payment BEFORE the Payment Due date. This payment should be AT LEAST the Minimum Payment Due.
• If you don't pay the full Statement Balance before the Payment Due date, you will be charged interest. (in most cases)
• The balance on your account on the Statement Date is what gets reported to the credit reporting agencies EQ, TU and EX. (in most cases)
• Best Practice: To maximize your credit score, let all your cards report zero balance EXCEPT ONE. For the one card that reports a non-zero balance, let balance reflect 1% of the credit line for that card.

Let's use a real example... the first statement for my brand new Chase Amazon rewards card

Credit Line: \$5000

Statement Date: 11/9/2012

New Balance: \$378.08

Minimum Payment: \$25.00

Payment Due Date: 12/6/2012

From this we can calculate 378/5000 = 7.56% utilization. This will get reported to the credit agencies.

I've made additional charges of \$208.32 since the 11/9/2012 statement date. So my up-to-today balance is 378.08 + 208.32 = \$586.04

(For the purpose of this example, let's assume that's all the additional charges I incur from now till the next statement date. In reality, you should keep track and recalculate just before you make a payment, taking into account any future charges you may make before the next statement date.)

What are my payment options?

1. Pay nothing. I will get hit with a 30-day late derogatory that will stay on my CR for 7 years! Plus, I incur interest.
2. Pay the \$25 minimum due. I won't get hit with a late derogatory but I'll have to pay interest.
3. Pay the \$378.08 statement balance. I won't get a late derogatory and I won't pay interest. The balance on my next statement (estimated 12/9/2012) will be \$208.32. Calculate 208/5000 = 4.16% utilization. Not bad, but we can do better!
4. Pay such that only \$50 balance appears on the next statement. Why \$50? Because that's 1% of the 5000 credit limit. Calculate the payment 586.04 - 50 = \$536.04.
5. Pay everything I owe which is \$586.04. This results in zero balance on the next statement. And thus 0% utilization.

In the eyes of a credit agency

1. Get hit with a 30-day late on your report. Higher utilization reported.
2. No late derogatory but higher utilization reported.
3. Lower utilization reported but not optimal utilization.
4. 1% utilization reported.
5. 0% utilization reported.

BEST PRACTICE: Do #5 for all cards except one. For that one card, do #4.

Does that make sense?

Current Score 08/20/2015 - TU 794 (Discover TU FICO® Score 8)
Current Score 07/28/2015 - EQ 786 (Citi EQ FICO® Bankcard Score 8)
GOAL - 800! - App free since 05/18/2015
Contributor
Posts: 106
Registered: ‎11-08-2012
##### Re: Newbie Question......

brother7 wrote:

I think there's some confusion in this thread, so let me try to clarify with a couple of points.

• You ALWAYS want to make a payment BEFORE the Payment Due date. This payment should be AT LEAST the Minimum Payment Due.
• If you don't pay the full Statement Balance before the Payment Due date, you will be charged interest. (in most cases)
• The balance on your account on the Statement Date is what gets reported to the credit reporting agencies EQ, TU and EX. (in most cases)
• Best Practice: To maximize your credit score, let all your cards report zero balance EXCEPT ONE. For the one card that reports a non-zero balance, let balance reflect 1% of the credit line for that card.

Let's use a real example... the first statement for my brand new Chase Amazon rewards card

Credit Line: \$5000

Statement Date: 11/9/2012

New Balance: \$378.08

Minimum Payment: \$25.00

Payment Due Date: 12/6/2012

From this we can calculate 378/5000 = 7.56% utilization. This will get reported to the credit agencies.

I've made additional charges of \$208.32 since the 11/9/2012 statement date. So my up-to-today balance is 378.08 + 208.32 = \$586.04

(For the purpose of this example, let's assume that's all the additional charges I incur from now till the next statement date. In reality, you should keep track and recalculate just before you make a payment, taking into account any future charges you may make before the next statement date.)

What are my payment options?

1. Pay nothing. I will get hit with a 30-day late derogatory that will stay on my CR for 7 years! Plus, I incur interest.
2. Pay the \$25 minimum due. I won't get hit with a late derogatory but I'll have to pay interest.
3. Pay the \$378.08 statement balance. I won't get a late derogatory and I won't pay interest. The balance on my next statement (estimated 12/9/2012) will be \$208.32. Calculate 208/5000 = 4.16% utilization. Not bad, but we can do better!
4. Pay such that only \$50 balance appears on the next statement. Why \$50? Because that's 1% of the 5000 credit limit. Calculate the payment 586.04 - 50 = \$536.04.
5. Pay everything I owe which is \$586.04. This results in zero balance on the next statement. And thus 0% utilization.

In the eyes of a credit agency

1. Get hit with a 30-day late on your report. Higher utilization reported.
2. No late derogatory but higher utilization reported.
3. Lower utilization reported but not optimal utilization.
4. 1% utilization reported.
5. 0% utilization reported.

BEST PRACTICE: Do #5 for all cards except one. For that one card, do #4.

Does that make sense?

cleared up a lot thank you. and to clarify, with option #4 if you pay the remaining \$50 right after it appears on the next statement, it will not incur interest?

Capital One Platinum MasterCard | \$2,000 | 05/08
Macy's Store Card | \$1,500 | 09/09
Chase Freedom Visa | \$3,100 | 11/11
Discover It | \$750 | 03/12
American Express BCE | \$1,000 | 11/12
Chase SP Visa Signature | \$8,000 | 12/12
Frequent Contributor
Posts: 385
Registered: ‎02-06-2009
##### Re: Newbie Question......
[ Edited ]

toiletbowl69er wrote:
to clarify, with option #4 if you pay the remaining \$50 right after it appears on the next statement, it will not incur interest?

The short answer to your question: True. Pay the \$50 after the next statement and it will not incur interest.

But instead of thinking of it that way, just wait till the next statement is received and repeat this exercise all over again.

Options 3-5 will not incur interest because you paid the Statement Balance or MORE.

Options 1-2 will incur interest because you paid less than the Statement Balance.

The \$50 is part of the additional charges made AFTER the first Statement Date. It was left there so that it will be reported as the New Balance on the next (December) statement, making it look like you have 50/5000 = 1% utilization which is optimal for credit scoring purposes.

Current Score 08/20/2015 - TU 794 (Discover TU FICO® Score 8)
Current Score 07/28/2015 - EQ 786 (Citi EQ FICO® Bankcard Score 8)
GOAL - 800! - App free since 05/18/2015
Valued Contributor
Posts: 1,253
Registered: ‎03-22-2012
##### Re: Newbie Question......

brother7 wrote:

I think there's some confusion in this thread, so let me try to clarify with a couple of points.

• You ALWAYS want to make a payment BEFORE the Payment Due date. This payment should be AT LEAST the Minimum Payment Due.
• If you don't pay the full Statement Balance before the Payment Due date, you will be charged interest. (in most cases)
• The balance on your account on the Statement Date is what gets reported to the credit reporting agencies EQ, TU and EX. (in most cases)
• Best Practice: To maximize your credit score, let all your cards report zero balance EXCEPT ONE. For the one card that reports a non-zero balance, let balance reflect 1% of the credit line for that card.

Let's use a real example... the first statement for my brand new Chase Amazon rewards card

Credit Line: \$5000

Statement Date: 11/9/2012

New Balance: \$378.08

Minimum Payment: \$25.00

Payment Due Date: 12/6/2012

From this we can calculate 378/5000 = 7.56% utilization. This will get reported to the credit agencies.

I've made additional charges of \$208.32 since the 11/9/2012 statement date. So my up-to-today balance is 378.08 + 208.32 = \$586.04

(For the purpose of this example, let's assume that's all the additional charges I incur from now till the next statement date. In reality, you should keep track and recalculate just before you make a payment, taking into account any future charges you may make before the next statement date.)

What are my payment options?

1. Pay nothing. I will get hit with a 30-day late derogatory that will stay on my CR for 7 years! Plus, I incur interest.
2. Pay the \$25 minimum due. I won't get hit with a late derogatory but I'll have to pay interest.
3. Pay the \$378.08 statement balance. I won't get a late derogatory and I won't pay interest. The balance on my next statement (estimated 12/9/2012) will be \$208.32. Calculate 208/5000 = 4.16% utilization. Not bad, but we can do better!
4. Pay such that only \$50 balance appears on the next statement. Why \$50? Because that's 1% of the 5000 credit limit. Calculate the payment 586.04 - 50 = \$536.04.
5. Pay everything I owe which is \$586.04. This results in zero balance on the next statement. And thus 0% utilization.

In the eyes of a credit agency

1. Get hit with a 30-day late on your report. Higher utilization reported.
2. No late derogatory but higher utilization reported.
3. Lower utilization reported but not optimal utilization.
4. 1% utilization reported.
5. 0% utilization reported.

BEST PRACTICE: Do #5 for all cards except one. For that one card, do #4.

Does that make sense?

+1 You did an awesome job explaining this! I agree with everything you said.

Good job!

Starting Score: EQ 658 6/18/12
Current Score: EQ 705 6/21/15 - EX 783 6/21/15 - TU 707 6/21/15
Goal Score: EQ 720+
Take the FICO Fitness Challenge

Valued Contributor
Posts: 1,253
Registered: ‎03-22-2012
##### Re: Newbie Question......

This is in regards to the OP. She needs to apply for NEW credit this coming February. My advice to her was to have all her new cards report a small balance until then. I think she needs to build a little bit of history in the next few months. When February rolls around just have 1 card report a small balance and have all the other cards at zero before applying for her new credit.

Starting Score: EQ 658 6/18/12
Current Score: EQ 705 6/21/15 - EX 783 6/21/15 - TU 707 6/21/15
Goal Score: EQ 720+
Take the FICO Fitness Challenge

Contributor
Posts: 268
Registered: ‎10-25-2012
##### Re: Newbie Question......
OMMGGGG WHAAAT?????? lol

Someone make this extremely easy...
If my statement date is the 12th and my due date is the 5th Tell me an exact date to pay an exact amount ....

I charged 157 with a \$1200 CL
So What should I pay and when??

Btw is that too much ultilization

-------------------------------------------------------------------------------------------------
EQ 701, TU 685, EX ?
Wallet:
Amazon store \$2500(10/12), Cap1 \$1500 (10/12), Discover \$1700 (11/1/12).
Frequent Contributor
Posts: 385
Registered: ‎02-06-2009
##### Re: Newbie Question......

Sitori wrote:
OMMGGGG WHAAAT?????? lol

Someone make this extremely easy...
If my statement date is the 12th and my due date is the 5th Tell me an exact date to pay an exact amount ....

I charged 157 with a \$1200 CL
So What should I pay and when??

Btw is that too much ultilization

Pay \$145 about 1 week before the due date. The remaining \$12 balance (1% of 1200) will report on the next month's statement.

NOTE: if you made any charges AFTER the statement date, include that amount in your payment.

is that clear?

Current Score 08/20/2015 - TU 794 (Discover TU FICO® Score 8)
Current Score 07/28/2015 - EQ 786 (Citi EQ FICO® Bankcard Score 8)
GOAL - 800! - App free since 05/18/2015
Contributor
Posts: 268
Registered: ‎10-25-2012
##### Re: Newbie Question......
Ok i think i got it. Thank you so much for explaining !!! It helped a lot.

And Jamie...I will use all cards Every month leaving a small balance on them around 5% (less? More?) until when? January? Then pay them all down to report zero except one ?

Is that right? I'm assuming for Christmas I will have a slightly higher utilization than 1% anyway...but I will let the balances carry over if you're suggesting it will help my chances of getting approved for care credit in late Feb/early March.

I really appreciate everyone breaking this down for me. Man is it confusing lol!

-------------------------------------------------------------------------------------------------
EQ 701, TU 685, EX ?
Wallet:
Amazon store \$2500(10/12), Cap1 \$1500 (10/12), Discover \$1700 (11/1/12).
Established Contributor
Posts: 2,112
Registered: ‎09-25-2011
##### Re: Newbie Question......

Sitori wrote:
Ok i think i got it. Thank you so much for explaining !!! It helped a lot.

And Jamie...I will use all cards Every month leaving a small balance on them around 5% (less? More?) until when? January? Then pay them all down to report zero except one ?

Is that right? I'm assuming for Christmas I will have a slightly higher utilization than 1% anyway...but I will let the balances carry over if you're suggesting it will help my chances of getting approved for care credit in late Feb/early March.

I really appreciate everyone breaking this down for me. Man is it confusing lol!

care credit is one of the easiest credit cards to get so don't worry too much, your doine fine. Since it's a card that shouldn't be always used or abused it's easier on the risk department. It's not like you'll go out and blow \$10,000 on unneeded surgery well maybe if it's cosmetic but those are rare compared to the number of people who blow out their money at walmart etc.

But I have to disagree with Jaime it doesn't matter if you carry large balances as long as you pay the minimum, your credit score will rebound just fine after it's paid off or brought down very low. Doesn't matter if you take a steady road on cruise control, or a roller coaster ride, only diference is the roller coaster will probably help you lose some change out of your pockets in the loops in interest =)

total credit limits \$108,400 Credit scores Ex 728 EQ 738 TU 758
Established Contributor
Posts: 731
Registered: ‎12-14-2011
##### Re: Newbie Question......

You must realize that utilization is not an average of your month to month balances. Utilization can be seen a a snapshot of your credit usage at the time a report/score was pulled. Unless you are checking your score and/or applying for credit your month to month utilization doesn't particularly matter. I'm not saying go and max out all of your cards, but don't stress too much about utilization. Biggest thing is paying your bills on time, and in full whenever possible.

“The real measure of your wealth is how much you’d be worth if you lost all your money.” ~Unknown
Citi Prestige World Elite Mastercard (\$35,000.00), Merrill+ Visa Signature (\$25,000.00), Amex BCP (\$29,700.00), Amex Green (NPSL), Capital One Quicksilver World Mastercard (\$10,000.00), Chase Ink Business Bold (NPSL)
TU-778 (12/03/2014))
EX (Plus) - 777 (10/21/2013)
EQ - 735 (April 2013)