New credit card usage and payment

[Anonymous]

So I've been doing a lot of reading the last week and learning. Thank you all very much to everyone who has contributed to my threads and all in general. This is really a great resource for anyone looking to learn. Still a few things I'm confused about however.

I just got 2 new cards and have been trying to get my scores up so I want to do everything right this time.

I have made small purchases on both cards after I got them. When I logged into my accounts both said I have no payments due and don't list the due dates. So I called both and both said my statement closes on 7&9. Normally payments would be due on the "first week of the month" and the 12th. But since I am so early in, I don't have payments due this first month. So my questions are:

1) I asked when they report to the bureaus and neither of them could give me that. So assuming I check when they begin to report, would it most likely be the same every month?

2) Since I have no payment due this month and don't know when they report, should I pay them off before this first statement and reporting date or since it is the first time, let them report a balance just to show I use them and then zero them out moving forward?

3) As far as utilization goes, in the event that I ever needed to carry a higher balance over 40%, if I paid it down after a month or 2 below 8.9%, would you get an immediate impact on score as if it was always low or does it take time keeping it down to see that scoring benefit?

[EAJuggalo]

1: 99% of issuers report a couple days after statement close.  I believe only US Bank is different, IIRC they report on the 1st of each month.  Chase will also report any time your balance is 0.

2:  Pay one of them off and let the other report a small balance, ideally 5-8% of your limit.

3:  Utilization has no memory, as soon as the pay down is reported you will get those points back.

[Anonymous]

thank you very much. I will pay one tonight then and rotate them monthly.

also good to know about utilization. In the event it is ever needed for a month or two. thank you again

[xaximus]

As long as you keep your total utilization across all of your cards combined lower then 8.9% (to be safe, I'd say 8%).

Example - if you're total credit line is 10k, you want to keep your total balance under $800. If you use your credit and PIF, then it's okay to use whatever but be responsible. Just keep your balance reported under 8% (800).

[Brian_Earl_Spilner]

It really depends on the cards and types of accounts. Both cap1 and amex require a statement to cut before counting a payment towards their credit steps programs. In addition, amex requires a balance to post on a statement every month for their steps program. That may or may not apply to you, but they're just examples of rules that banks have in regards to payments and balances on certain cards. Personally, I would wait until a statement cuts. If you pay and the system isn't showing the charge yet, they may just send you a check for overpaying. Cap1 tends to do this.

As for utilization, if you report 40% and pay it off, it will stay at 40% until the next reporting, at which point, it will report the balance at that time. There are a few exceptions. Chase will report anytime you pay off a card. Discover is said to report any time there is a change to the account.

[Anonymous]

There's no need to micromanage your utilization if you aren't going to be applying for new credit soon.  As soon as a new balance reports, your scores will change based on your newly reported utilization.  Most cards report the statement balance a few days after the statement close date.  So, if your statement closes on 9/4 for example, your utilization on 9/4 is 30% and your utilization on 9/6 is 50% due to new charges posting, the 30% will report for that month.  If you pay off the card, the new utilization won't report until the next statement close date (on 10/4), unless it's a Chase card in which case it will report anytime you pay it to a zero balance.

If you're planning on applying for new credit in the near future, especially something like a mortgage where you want the best possible rates, it's good to keep reported utilization below 8.9% to maximize your scores.  This is easy to do by paying your card down to a low balance before the statement close date so the statement balance is low.  If you have 2 or more cards, the AZEO method is the best way to maximize your scores before applying for new credit... here you make sure ONE card reports a low balance (below 8.9% but over $5 or so) and all others report a ZERO balance.  This gives you the highest possible FICO score based on utilization.

If you have several cards, chances are they have different statement close dates and due dates, and whatever your combined reported utilization is will vary as each card's balance reports.  It may be a bit confusing, but as long as your utilization (both per card and combined) are kept low, your scores will be fine.  If you use the AZEO method, it may take a while for all the zero balances to report depending on when each card's statement balance reports.  If you pay a card to zero, avoid using it until after the statement closes to ensure it reports as zero, and the card you're reporting the small balance on, avoid running it up over 8.9% between the time you pay it down and it reports.  With multiple cards and multiple statement close dates, it's easy to rotate between them to optimize the usage... while avoiding using one, you can use the next one in the rotation, and so forth.  If you have Chase cards and non-Chase cards, it's easiest to pay the Chase cards to zero since they report zero balances right away, and use a non-Chase card for the non-zero balance.

[TheBoondocks]

Okay, so you're saying pay before the due date to $0 to avoid interest but after that the payment due, make another payment like $5 so that the statement could close? Pretty much, make a payment after the due date as the card is paid in full.

[Anonymous]

The due date is usually about 3-4 days before the next statement close date... so you have about 25-28 days (from statement close to next due date) to make a payment... this will vary depending on the number of days in the month, etc.

If you want to have a card report zero, simply pay it to zero before the statement cut date (or due date if the amount is due sooner) and then avoid using the card for those few days until the statement cuts.

If you want to report a small balance, you can either (1) pay it down to the small balance and let it report, or (2) pay to zero and then use the card for a small charge(s) to get a small balance to report before the statement close (just make sure you give it enough time for the charge to actually post; if it's still pending when the statement closes, it won't report as part of the balance).

As far as avoiding interest charges but still allowing a balance to report: there are two balances in play here: one is the current balance of the card and one is the statement balance.  On the statement close date, the current balance becomes the statement balance for that period.  You then have around 28 days (give or take) before the payment is due, and you should pay at least the statement balance to avoid interest charges.  But, most people will continue to use their card, running up more charges, causing the current balance to be higher than the statement balance by the time the due date rolls around.  So, let's say your statement closes on 9/4 with a $200 balance, your next payment is due on 10/1, and by then you've run up another $250 in charges.  By the 10/1 due date the statement balance is still $200 but your current balance is now $450.  You need to pay $200 (the last statement balance) to avoid interest charges.  But if you want to have a lower balance report for utilization purposes, you can pay more... let's say you want $25 to report.  You'd pay $425 ($450 - 25) by the due date; assuming you don't put any more charges on before the 10/4 statement closes you'll have the $25 balance reporting, and since you paid more than the $200 statement balance, you won't pay any interest.  The balance that appears on the next statement (the $25 plus any new charges up to the statement date) would become the balance you'd need to pay the following month to avoid interest.

Most average card users just use their cards and pay the amount on the bill when it's due, and that's fine, but if you're looking to optimize your utilization, paying to minimize statement balance helps... so instead of paying the statement balance, you'd subtract the desired reporting balance from the current balance at the time you make the payment, and pay that amount.

[tcbofade]

As noted above, MOST CC issuers will report your statement balance to the CRA's a few days after the statement cuts...but there ARE exceptions.

For instance, I have a card through a local credit union...statement cuts on the 21st, but they don't update statement balance information to the CRA's until the last business day of the month...

...kind of frustrating when one pulls Fico scores on the first... THAT balance is never updated...