Effect on Credit Score : Pay in Full vs Minimum

[Anonymous]

Hi everyone,

Just wanted to say that I found this website about a month ago and the information provided by the members here has been great. I have recently opened up two credit cards (that will actually be useful to my spending needs, the Chase Freedom Unlimited and AMEX BCP) and have a question now that I have received my first bill from Chase.

I was given a SL of 5700 and spent about 300 during this billing cycle. I understand that I have 0% APR for a year and was wondering what would be the effect on my credit score if I didn't pay the entire amount for the first few months? I had always paid my credit card bills in full prior to this, but I am moving into a new apartment in about two months and will be needing some extra money for that process. Will not paying in full have an impact on my credit score?  My credit score from my AMEX is 716.

The reason I am asking this is because I have heard differing accounts as to what is reported to credit bureaus. I have heard that as long as the payment is on time and at least the minimum is paid, your obligation is complete. I have also heard that they report how much you paid and that not paying off your credit card could lead to not being able to get credit line increases.

Thank you in advance for the advice,

Curtis

[Anonymous]

If you have a deferred interet agreement, by all means take advantage of it. The slip in your score is determined by overall utilization and single account's util's. If you have several other cards with limits the same as your deferred interest account or more, and they are paid off,  you score may not be affected much. if you have balances on all your accounts the effect of an additional card reporting over 30% is much worse. 

The most important part is saving money. FICO scores have no memory. If it takes you 11 months to pay off a 12 month agreement, it costed you nothing extra to do it that way. If you pay of an agreement much earlier you have the emotional satisfaction and the gurantee your score will be on the track for its maximum at that point in time, again stressing your scores fluxuate as some banks report the balances all different times of the month.

[Anonymous]

That makes things a bit clearer. My total credit limit still brings me in way under 10% utilization so I guess there is no real reason not to take advantage of the deferred interest.

Thanks a lot.

[Anonymous]

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@Anonymous wrote:

That makes things a bit clearer. My total credit limit still brings me in way under 10% utilization so I guess there is no real reason not to take advantage of the deferred interest.

Thanks a lot.

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As stated above, utilization-based score factors have no memory, so there is no long term impact.   

Just to rant (again): Not aimed at OP

people here worry FAR too much about score when they don't need.   Score matters (in many cases) when you are about to app, and at other times doesn't matter.   Don't spend money (or fail to save money) preventing small fluctuations in score.

As a thought experiment, if I gave you $100M on condition that you paid one card 60 days late, would you say "No, I don't want any lates as they last for years"?  Sadly I think many people here would say that.

[sarge12]

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@Anonymous wrote:

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@Anonymous wrote:

That makes things a bit clearer. My total credit limit still brings me in way under 10% utilization so I guess there is no real reason not to take advantage of the deferred interest.

Thanks a lot.

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As stated above, utilization-based score factors have no memory, so there is no long term impact.   

Just to rant (again): Not aimed at OP

people here worry FAR too much about score when they don't need.   Score matters (in many cases) when you are about to app, and at other times doesn't matter.   Don't spend money (or fail to save money) preventing small fluctuations in score.

As a thought experiment, if I gave you $100M on condition that you paid one card 60 days late, would you say "No, I don't want any lates as they last for years"?  Sadly I think many people here would say that.

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I accept your generous offer...PM me the details...heck I'll pay them all 90 days late.

[Anonymous]

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@sarge12 wrote:

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@Anonymous wrote:

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@Anonymous wrote:

That makes things a bit clearer. My total credit limit still brings me in way under 10% utilization so I guess there is no real reason not to take advantage of the deferred interest.

Thanks a lot.

---

As stated above, utilization-based score factors have no memory, so there is no long term impact.   

Just to rant (again): Not aimed at OP

people here worry FAR too much about score when they don't need.   Score matters (in many cases) when you are about to app, and at other times doesn't matter.   Don't spend money (or fail to save money) preventing small fluctuations in score.

As a thought experiment, if I gave you $100M on condition that you paid one card 60 days late, would you say "No, I don't want any lates as they last for years"?  Sadly I think many people here would say that.

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I accept your generous offer...PM me the details...heck I'll pay them all 90 days late.

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OK.   But full disclosure: due to heavy customer interest in our offer, our funds may be a little later than expected.  Please keep not paying your cards, and $100M will arrive in "due course"

Thanks

[Anonymous]

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@Anonymous wrote:

I was given a SL of 5700 and spent about 300 during this billing cycle. I understand that I have 0% APR for a year and was wondering what would be the effect on my credit score if I didn't pay the entire amount for the first few months? I had always paid my credit card bills in full prior to this, but I am moving into a new apartment in about two months and will be needing some extra money for that process. Will not paying in full have an impact on my credit score?  My credit score from my AMEX is 716.

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First, congratulations on obtaining two useful cards from solid creditors.  You are correct in that if you pay the minimum payment by the due date that you have met your credit obligations which is all you need to add positive history to your profile.  A $300 balance out of a $5700 CL puts you at roughly 5% utilization; if you raise your balance to $510 you still come in at 9% utilization where is the ideal percentage to come in at (or less) to maximize your score.  Reporting a 0 balance on all of your cards will result in a score drop, which could be 10 points or could be 40 points depending on your profile, but as suggested above that rebounds instantly the second you report a small balance on one account.

[Anonymous]

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@Anonymous wrote:

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people here worry FAR too much about score when they don't need.   Score matters (in many cases) when you are about to app, and at other times doesn't matter.   Don't spend money (or fail to save money) preventing small fluctuations in score.

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LTL, while I agree with your statement that the majority on these forums worry far too much about a few utilization points and maximizing their scores when they aren't even considering apping any time soon, there is one thing to keep in mind though and one reason to keep utilization in check:

You never know when creditors are soft pulling you and updating their records as to where your credit profile stands.  If an individual keeps their utilization amounts high because they have no intentions of apping any time soon, creditors from SPs may take note of this.  Does it matter?  That depends.  To many, no... but to others, it could.  Say someone wants to request a couple of CLIs next month, but currently is at 50% aggregate utilization.  The creditors they want CLIs from SP them today.  3 weeks from now, the individual pays down their aggregate utilization to 1%, they pull their 3B scores and see they are all ideal prior to requesting the CLIs.  If the creditors go off of their most recent SPs, they'll still see 50% utilization on this individual. 

This could play a significant role in their ability to receive a CLI, or in the event of getting one a role in the amount received for the CLI.  For some creditors this matters a lot, for others it doesn't seem to matter much.  Just something to keep in mind and an example of how utilization can be important even when there's no intentions of apping in the immediate future.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

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people here worry FAR too much about score when they don't need.   Score matters (in many cases) when you are about to app, and at other times doesn't matter.   Don't spend money (or fail to save money) preventing small fluctuations in score.

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LTL, while I agree with your statement that the majority on these forums worry far too much about a few utilization points and maximizing their scores when they aren't even considering apping any time soon, there is one thing to keep in mind though and one reason to keep utilization in check:

You never know when creditors are soft pulling you and updating their records as to where your credit profile stands.  If an individual keeps their utilization amounts high because they have no intentions of apping any time soon, creditors from SPs may take note of this.  Does it matter?  That depends.  To many, no... but to others, it could.  Say someone wants to request a couple of CLIs next month, but currently is at 50% aggregate utilization.  The creditors they want CLIs from SP them today.  3 weeks from now, the individual pays down their aggregate utilization to 1%, they pull their 3B scores and see they are all ideal prior to requesting the CLIs.  If the creditors go off of their most recent SPs, they'll still see 50% utilization on this individual. 

This could play a significant role in their ability to receive a CLI, or in the event of getting one a role in the amount received for the CLI.  For some creditors this matters a lot, for others it doesn't seem to matter much.  Just something to keep in mind and an example of how utilization can be important even when there's no intentions of apping in the immediate future.

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Well, then define "apping" to include CLI apps.  (And my other rant is about over-concern with CLIs, simply not that critical in most cases)

[driftless]

There is another issue to consider: while just paying the minimum will probably not effect the OP's scores it is likely to effect the lender's internal scoring of the OP. Chase is one bank that I would not want to make minimum payments to, regardless of the small amount being carried, if I would have a hope for a SP auto CLI.