topic Automated Pay in Full? in Credit Cards

Automated Pay in Full?

Anonymous — Sun, 22 Jul 2012 16:45:07 GMT

Hello All. I'm new to these boards, and am finding them very informative! I have a question I can't seem to find the answer to, or there are some differing opinions. I figured I'd give you guys my specifics and maybe you can tell me if I'm doing this right.

I have a credit card from Citi I've had for about 5 years. It has a $4,500 limit and 9.25% APR. I maxed it out in college and since graduating (2009) I've been paying it down, and I finally paid it off in this June. I've had my debit card information stolen a few times making online purchases, so since Citi offers fraud protection and no liability, I decided to use only the Citi card for all online purchases. These could range from $50 to $500 a month. I set up my card to automatically pay in full each month. Citi has a grace period so interest isn't charged and it always charges me the amount of the last statement balance. This is my only credit card. I do also have an auto loan and school loans making up my credit report. My score ranges from 701-780.

So, is this a good way to use this card to improve my score? Should I be letting a balance remain, or since there is some with each balance statement, that's all I need? Should I be absolutely sure not to exceed 9% of available credit ($400) every month?

Thanks in advance!

Tiff

Re: Automated Pay in Full?

MarcinXP — Sun, 22 Jul 2012 16:55:38 GMT

@Anonymous wrote:
Hello All. I'm new to these boards, and am finding them very informative! I have a question I can't seem to find the answer to, or there are some differing opinions. I figured I'd give you guys my specifics and maybe you can tell me if I'm doing this right.
I have a credit card from Citi I've had for about 5 years. It has a $4,500 limit and 9.25% APR. I maxed it out in college and since graduating (2009) I've been paying it down, and I finally paid it off in this June. I've had my debit card information stolen a few times making online purchases, so since Citi offers fraud protection and no liability, I decided to use only the Citi card for all online purchases. These could range from $50 to $500 a month. I set up my card to automatically pay in full each month. Citi has a grace period so interest isn't charged and it always charges me the amount of the last statement balance. This is my only credit card. I do also have an auto loan and school loans making up my credit report. My score ranges from 701-780.
So, is this a good way to use this card to improve my score? Should I be letting a balance remain, or since there is some with each balance statement, that's all I need? Should I be absolutely sure not to exceed 9% of available credit ($400) every month?

Thanks in advance!
Tiff
Tiff,

It seems that your score is good to excellent but with one credit card only it might seem a little thin to most creditors. Ideally you should have between 3-4 credit cards and utilization of less than 9% reporting. You can use your one card for everything and charge as much as you want, but at the end of the month before your statement cuts you should leave no more than 9%.

My suggestion is to look for more revolving credit and get at least 2 more cards so that you can really get your score to where it needs to be but most importantly to show that you can balance multiple cards and not seen as a thin file. My recommendations would be to get AMEX ZYNC and perhaps even one of their revolver cards such as BLUE CASH. Then apply for Chase Freedom and Discover More. Not sure if you will get all those cards, but if you don't and for some reason are declined for thin file then Capital One Green Cash would be a good way to go along with a Barclay product.

Once you get multiple cards best way to maximize your FICO score is to have all but one card reportin $0 balance and one of the cards between 5-9%. Also utilization is important for your FICO score but don't stress about it either. If you are not applying for more credit or anything like that then who cares what your utilization and score is....it's important to have that under control if you know you are absolutely going to apply for something or ask for CLI, other than that you can safely keep under 30% on your cards just don't go overboard and max it out as some companies will soft your credit and can take AA against your limit because they might think you are over extending yourself!

Re: Automated Pay in Full?

Anonymous — Sun, 22 Jul 2012 16:59:41 GMT

There's no need to carry a balance, it does nothing to help your score. The balance that's reported is almost certainly the statement balance. You also don't need to worry about how much of the credit line is used, unless you will be applying for credit that month, because past utilization is irrelevant. I think the best thing to do to increase your credit would be to apply for 1 or 2 more cards. Having multiple cards in good standing will increase your score compared to only having one.

Re: Automated Pay in Full?

Anonymous — Sun, 22 Jul 2012 17:30:08 GMT

Marcin, Koop: Thanks for your replies! I never considered getting another card. It seems awfully silly since I'm going to have to make up ways to use it (i.e. it isn't needed) but I guess if it will improve my score I'll go for it

Also, I'm looking at buying a home right now. I should put off applying for a second or third card until after I'm done with the mortgage process, correct?

Re: Automated Pay in Full?

jamie123 — Sun, 22 Jul 2012 17:31:05 GMT

I agree with the other posters recommendations.

You should apply for 2 more PRIME credit cards.

Some of the banks considered prime on these boards are:

CitiBank

Chase

Bank of America

AMEX

Discover

Wells Fargo

You should apply for 2 cards from different banks to diversify your credit portfolio. Your scores and age of accounts should qualify you for almost any card you desire.

You have been doing a great job! Keep up the good work!

Good luck!

Re: Automated Pay in Full?

LS2982 — Sun, 22 Jul 2012 17:37:09 GMT

I would recommend having at least 3 credit cards on your file. Your scores are good to get in with AMEX/Discover, I would also look at Chase Freedom MC version. That way you have 1 card from each brand (V/MC/AMEX/Discover). FICO score wise you'll take a hit early for new accounts but recover and your score will only increase from there.

Re: Automated Pay in Full?

Open123 — Sun, 22 Jul 2012 17:38:26 GMT

@Anonymous wrote:

Also, I'm looking at buying a home right now. I should put off applying for a second or third card until after I'm done with the mortgage process, correct?

Don't do anything until about 45 days after your mortgage closes.

Then, you should open up about 3 or 4 new credit cards. I'd go with Amex, Chase, Citi, BofA, and/or Discover. Try to mix in cash rewards, travel related benefits, and ladder the bonus spending categories.

Re: Automated Pay in Full?

LS2982 — Sun, 22 Jul 2012 17:38:47 GMT

Edit: I'm sorry I didn't see your latest post, definitely wait until the Mortgage is done before apping for new credit!

Re: Automated Pay in Full?

jamie123 — Sun, 22 Jul 2012 17:43:09 GMT

Do NOT apply for any type of credit 6 months before you apply for your mortgage!

The month BEFORE you apply for your mortgage make sure your credit card is PIF and DO NOT USE IT THAT MONTH!

You want to make sure your score will be as high as possible when the lender pulls for the mortgage. A few FICO score points here or there could get you a lower interest rate that you will be living with for years.

Don't do anything with your credit until the mortgage has closed. Sometimes lenders will need to pull your score twice during the mortgage process.

Re: Automated Pay in Full?

Anonymous — Sun, 22 Jul 2012 18:03:26 GMT

Jamie: Wow, thanks! I did not realize I should get my balance to $0 and not use it before applying for the mortgage.

Re: Automated Pay in Full?

MarcinXP — Sun, 22 Jul 2012 18:12:05 GMT

Agreed with above posters. you should not apply for anything while in mortgage process or 6 months before starting the process. Also wait 45-60 days after mortgage is completed before starting to app for other things.

Just because you have multiple cards it does not mean you have to carry it or even use it regularly. Some cards I keep at home in a drawer but they are being used for bills. For example my AMEX ZYNC that I have is barely used for anything, however I have two packs which is GYM pack $15 a year and UTILITIES pack which is $25 a year. With that I have automatic deductions for gym membership which is $61 a month and cable and cellphone bill which is about $260 a month. Also my electric and car insurance is taken out of Zync as well monthly which that comes out to about $300 average a month (more in summer). Thanks to the packs I get double points and 1% cash back on rest and it helps me organize my bills as well.

Rather than having 5 bills taken out of my checking account every month which could hit at any point whenever bills are due, everything is taken out of AMEX automatically and then rather than remembering 5 different due dates every month and ensuring that I keep my checking account balanced, I just worry about one due date on AMEX and paid it all off every month. Also with the amount that goes through it I make money at the end of the year. The gym pack pays itself off pretty much while utlities pack pays itself off and I make about $25+ cash back every year..on top of that I make about $50 bucks just in rest of the bills and between using it sporadically for travel purposes I make money off AMEX so don't be afraid to use credit cards for other things besides purchases...

then I have a credit card that is in drawer for last 2 years because Capital One refused to increase my limit past $500, but because there is no AF (or should I say they waived it last 2 years) I use it for NETFLIX$7.99 every month and its set on autopay. No reason to get rid of extra $500 in available credit if I don't have to pay for it and it helps my score...the day they won't waive the AF is the day the card will be cancelled.

Make the credit work for you...

I also have a Target card not because I use it or anything, but because it's 5% off target purchases...I go to target, buy something and then go home and pay it off...I bought 2 IPOD touches last christmas which were $195 each minus $20 gift card so about $175 each and then 5% off made it about $167.50...which was a great deal considering lower some stores had it was $199 on sale....shop smart with credit and save money!!!

Re: Automated Pay in Full?

webhopper — Sun, 22 Jul 2012 19:17:57 GMT

You should let a small balance report before apping for the mortgage. Anything less than about 400 dollars will do you some good fico wise. Also make sure that you maintain a small balance because they will pull your credit several times; at least one time before actually funding the loan.