topic How many cards to charge per month ideally? in General Credit Topics

How many cards to charge per month ideally?

Anonymous — Fri, 23 Nov 2012 12:33:19 GMT

I have an amex card, well fargo, and chase along with a macys card. I never needed to use credit in the past so my use history is limited. For the past 7 months I've used all 3 of my major cards monthly and kept my utilization low on each. I figure it's better to use all 3 since it would build more history, but I'm wondering if I could get better credit results if I used just one or 2 of them, every point counts for me. I checked my score on myfico and it was 702. I'm looking to get my loan qualification for a home done but I think I'll get better rates if I score 700+ on the lender credit check. Should I be using all 3 monthly with low utilizations of course or less for ideal credit results? I could care less about using the card I'm just playing the game. Bonus points if you know if the lender will do a check through myfico or one of the other agencies? Extra bonus if you know if the inquiry that the lender makes affects the current score he sees.

Re: How many cards to charge per month ideally?

brother7 — Fri, 23 Nov 2012 15:46:01 GMT

It's the general consensus on the myFICO forums that to optimize credit score, have all credit cards report zero balance EXCEPT one. For the one that reports, let it report 1% utilization.

In your particular case, this would mean paying off the Macy's, AMEX, and Wells Fargo card in full, then putting them away in a drawer.

With the remaining Chase card, let's assume it has a $1000 credit line, the due date is 12/1, the next statement date is 12/5 and the current balance today (not the statement balance) is $300. To have 1% utilization report to the CRAs, you need a $10 balance on the statement date. Therefore, make a $290 payment before the due date, let $10 report on the statement date.

If you continue to use the card from today to the next statement date 12/5, you should increase your payment by the same amount to make sure that only $10 reports on the statement date.

Does that make sense?

Re: How many cards to charge per month ideally?

Anonymous — Fri, 23 Nov 2012 16:14:01 GMT

I think I got it. I want to make sure I pay all but 1% of the bill and let it carry a balance over to the next statement date (which is when they give tell me how much money is due I think)? I did think paying in full each month was best. If I do use the card between the closing and next statement date I should pay it to lower it to 1% before the actual statement date right? I'm assuming either they will only see the utilization ratio balance on statement dates or they just perceive it was being better whether I pay the card before the statement date or I happened to use 1% only? I'm assuming they can see how much was spent on the card and paid off because I can see that on the credit report. If I spent 300 dollars and paid 290 before the statement date they would only report 10 dollars? I think I'm a little more confused from being up all night lol. That's weird, my other cards seem like a waste. Intuitively I would think the more I pay off the more positive credit history proof I would have. If I only use one a month maybe I should rotate them.

Re: How many cards to charge per month ideally?

brother7 — Fri, 23 Nov 2012 16:38:00 GMT

To keep things simple, instead or rotating cards, just stick with using ONE card on a regular basis. You only need to use the other cards once every 6 months or so, for the purpose of showing activitiy so that the issuer will not automatically close it.

Credit reports and credit scores are a snapshot in time.

Credit card issuers feed the CRAs data on a periodic basis. In most cases, the data is fed monthly. The actual data reported is usually what is on the monthly statement. And the data is reported to the CRAs a short time after the monthly statement date.

So what you're really doing is optimizing what appears on your monthly statement, which is what gets fed to the CRAs.

A couple of comments:

1. ALWAYS pay AT LEAST the Minimum Payment Due. This keeps any delinquencies from appearing on your report.

2. If possible, PAY IN FULL (the statement balance) to avoid interest charges.

In the scenario I gave, if the statement balance is $300 and you pay $290, you WILL incur an interest charge. However, in practice, you will be using the card throughout the month. So let's say you charge an additional $50 during the month. The balance is now $350. To show 1% utilization, you make a payment of $340 before the due date. So you kill 2 birds with 1 stone: you PAID IN FULL to avoid interest charges and you reported 1% UTILIZATION

Re: How many cards to charge per month ideally?

HiLine — Fri, 23 Nov 2012 20:18:03 GMT

If you're not applying for credit any time soon, keeping utilization low does not do you any good. If this is your case, I would charge all cards just for the sake of keeping the accounts open.

Re: How many cards to charge per month ideally?

brother7 — Fri, 23 Nov 2012 23:15:51 GMT

@HiLine wrote:
If you're not applying for credit any time soon, keeping utilization low does not do you any good.

The OP said "I'm looking to get my loan qualification for a home done"

Re: How many cards to charge per month ideally?

Anonymous — Sat, 24 Nov 2012 00:53:09 GMT

"In the scenario I gave, if the statement balance is $300 and you pay $290, you WILL incur an interest charge."

I thought the goal was to have a 1% utilization on the statement balance?

Re: How many cards to charge per month ideally?

brother7 — Sat, 24 Nov 2012 02:46:47 GMT

For optimal credit score, 1% utilization on one card is ideal.

If 1% utilization is your primary goal AND you're willing to achieve that goal, no matter what the cost, then pay $290. If the last statement balance was > $290, then you WILL incur interest charges because the statement balance was not paid-in-full. However, since 1% utilization was the goal, no matter what the cost, the goal was achieved.

If no interest charges is the goal, then you must pay the statement balance in full ($300). If you do, you will have 0% utilization.

But like I mentioned, it is possible to accomplish both goals (pay-in-full AND 1% utilization). You do this by continuing to use your card throughout the month, AFTER the last statement date.

I'll spell out the scenario again on how to do this:

On statement date 12/1/2012, the statement balance is $300.

On due date 12/5/2012, you pay-in-full $300.

On 12/6/2012, you buy $10 worth of gas.

On 1/1/2013, the new statement is printed. This is what it says.

Previous Statement Balance $300

Payment Made - $300

New Charges + $10

New Statement Balance $10

Voila! You paid-in-full so you didn't incur any interest charges AND 1% utilization is reported!

Now fast forward to the next month:

On statement date 1/1/2013, the statement balance is $10.

On due date 1/5/2013, you pay-in-full $10.

On 1/6/2012, you buy $10 worth of gas.

On 2/1/2013, the new statement is printed. This is what it says.

Previous Statement Balance $10

Payment Made - $10

New Charges + $10

New Statement Balance $10

Voila! You did it again! Keep doing this every month and you'll accomplish both tasks at once.

Re: How many cards to charge per month ideally?

vanillabean — Sat, 24 Nov 2012 03:51:31 GMT

@brother7 wrote:

I'll spell out the scenario again on how to do this:

On statement date 12/1/2012, the statement balance is $300.
On due date 12/5/2012, you pay-in-full $300.

Did you just shoot yourself in the foot?

Re: How many cards to charge per month ideally?

brother7 — Sat, 24 Nov 2012 04:07:41 GMT

@Anonymous-own-fico wrote:
@brother7 wrote:

I'll spell out the scenario again on how to do this:

On statement date 12/1/2012, the statement balance is $300.
On due date 12/5/2012, you pay-in-full $300.

Did you just shoot yourself in the foot?

I don't think so because "On 12/6/2012, you buy $10 worth of gas." so the next statement will report $10. With a $1000 CL, that's 1% utilization.

Re: How many cards to charge per month ideally?

HiLine — Sat, 24 Nov 2012 07:14:15 GMT

@Anonymous wrote:
"In the scenario I gave, if the statement balance is $300 and you pay $290, you WILL incur an interest charge."

I thought the goal was to have a 1% utilization on the statement balance?

Leave $10 on the balance when the statement cuts. Pay off the $10 balance when it has been reported. You'll pay $0 interest.

@brother7 wrote:
@HiLine wrote:
If you're not applying for credit any time soon, keeping utilization low does not do you any good.
The OP said "I'm looking to get my loan qualification for a home done"

Oh didn't see that. Sorry!

Re: How many cards to charge per month ideally?

Anonymous — Sat, 24 Nov 2012 07:49:25 GMT

Paying the full balance and charging 1% a day or so after is genius assuming the balance they see comes a few days after the statement date. I always figured the creditor would send the amount due up to the point of the statement date, and whether it was paid to the credit bureau like how it shows on credit reports. From this I would gather if I paid another card off the next day the credit burreau would report 0% ultilzation which I would think is the same or similar to not using the card? I always pay my cards off in full the day the balance posts.

Re: How many cards to charge per month ideally?

vanillabean — Sat, 24 Nov 2012 15:32:02 GMT

@brother7 wrote:

With the remaining Chase card, let's assume it has a $1000 credit line, the due date is 12/1, the next statement date is 12/5 and the current balance today (not the statement balance) is $300. To have 1% utilization report to the CRAs, you need a $10 balance on the statement date. Therefore, make a $290 payment before the due date, let $10 report on the statement date.

@brother7 wrote:

I'll spell out the scenario again on how to do this:

On statement date 12/1/2012, the statement balance is $300.
On due date 12/5/2012, you pay-in-full $300.

I'm saying that in your second post maybe you switched the statement date and the preceding due date compared to the wording of your first post?

It should be added that to have a statement post the $10 there's no reason to pay $290 by the preceding due date; there is no direct relation between the two dates. If you pay down the balance say two days before the statement date, that's usually plenty.

@Anonymous wrote:

Paying the full balance and charging 1% a day or so after is genius assuming the balance they see comes a few days after the statement date. I always figured the creditor would send the amount due up to the point of the statement date, and whether it was paid to the credit bureau like how it shows on credit reports. From this I would gather if I paid another card off the next day the credit burreau would report 0% ultilzation which I would think is the same or similar to not using the card? I always pay my cards off in full the day the balance posts.

It actually doesn't matter whether you pay the card off as soon as the statement has posted or you do it by the due date; it's all within the grace period and you pay no interest. Or are you saying that you pay off your card early in the day before the afternoon payment cutoff and the evening statement cutoff?

Re: How many cards to charge per month ideally?

Anonymous — Sat, 24 Nov 2012 14:08:58 GMT

Not sure what the "afternoon payment cutoff and the evening statement cutoff" is; I pay it off in full I'd say up to 24 hours after the online account status shows there is a payment which is due in the next 24 days or something.

Yeah I think brother7 got a little wrapped up there, but I think he meant the former part were you want to have a 1% balance before the statement date. From what I gather about credit I don't think what was paid off prior to that statement date is ever known to the credit bureaus. For example if I had a 1k limit and $500 on the card, as long as 490 was paid before the statement date closed I think the credit bureaus would only see the $10 owed. I figured the statement date balance would go to the bureau as a snapshot of the balance when the close posted regardless if I charged $10 in gas the day after the statement date closed; this may not be the case though.

I do appreciate the help from everyone. I'm a credit noob. I really only started using the cards regularly, maybe 8 months ago, when I realized I wanted to buy a house. I actually opened up the 2 new cards, thinking it would be a good thing, when I read that 10% of credit was new credit. Unfortunately I found out new credit hurts my credit, at least short term lol. I guess in the future I'll stick to using one or two of the main cards monthly, just figured more card use meant more history, especially considering my lack of history. I'm actually living with my ex gf too and feel fire under my, can I say, ass, especially when she's annoyed.

Re: How many cards to charge per month ideally?

Anonymous — Sat, 24 Nov 2012 14:33:45 GMT

What was explained is that you don't have to pay a dime in interest to show 1% util. My cards usually report 5 to 7 days after statement closes and they report the balance that I had at that time, this means that paying in full immediately after statement closes usually has no effect until the next report/statement (if you carry a balance after the statement cuts and it becomes due you will be charged interest). Best thing to do is what was already explained; do your thing (use the card normally), pay in full and only allow a small amount to report when the statement closes. When the bill arrives immediately pay it off and use the card again, pay everything and only leave the same small balance, repeat until you get your mortgage/loan approved and closed.

Re: How many cards to charge per month ideally?

vanillabean — Sat, 24 Nov 2012 19:09:31 GMT

@Anonymous wrote:

Not sure what the "afternoon payment cutoff and the evening statement cutoff" is; I pay it off in full I'd say up to 24 hours after the online account status shows there is a payment which is due in the next 24 days or something.

Yeah I think brother7 got a little wrapped up there, but I think he meant the former part were you want to have a 1% balance before the statement date. From what I gather about credit I don't think what was paid off prior to that statement date is ever known to the credit bureaus.

Yes, the credit bureaus don't see that. You would think that credit reports and scores wouldn't be reasonably accurate, given a big part of the picture is left out. After all, the risk is about how well you administer credit. The bottomline though is whether you have a pattern of significant credit card debt. The credit bureaus by the way also can't see if debt is carried over from the previous billing cycle.

If you pay after business hours on a given day, the official payment date will be the next day. That's a daily cutoff, which often takes place sometime in the afternoon. The monthly statement cutoff usually happens close to midnight of where the credit company is located. Could be mid-evening if the credit card holder resides in a western time zone.

I brought up the cutoffs because paying down the balance on the statement date just hours ahead of the end of billing cycle isn't for everyone. Amex for instance says it'll take 24-48 hours for your payment to post, but I have noticed that if I make a payment in the morning of the statement date, it's reflected in the current billing cycle.