Newbie with Credit Card, need help

[Anonymous]

Hi, I just recently was approved for a Capital One card with a $500 limit.  This is my first credit card since going through some rough times back in 2009.  Admittedly, I haven't ever used a credit card correctly and have always carried a balance.  I really didn't want a credit card but was told it should help boost my score since I had no revolving tradelines reporting. 

My questions:   I want to use this card to the full effect.  Meaning I would like to be smart and have it affect my score as it should.  I have been told I need to use it, and pay it off every month.  Fine and dandy that is not an issue anymore.  I did have to pay an annual fee of $39.00, I just got that first statement, and paid the $39.00 immediately rather than waiting until my statement payment date of July 28.  Now yesterday, I bought a freezer, with a purchase price of $186, I decided to put it on the card and try out this use and pay it off thing.  How do I do this the right way?  Do I need for a balance to post on it at the next statement date?  My intention was to pay this off immediately but am hearing you should have a small balance say 5% which will post to the CRA each month?????  I would much rather just pay it off and have hte balance 0 each month.

Needless to say I am cornfused.  Can someone lay this out for me on the best way to use this card to help boost my score?  Thanks.

[Anonymous]

Hey toolie, you're doing great!  Congrats on your new card and taking great care with it.

When you only have one revolving account open, I would recommend allowing the card to report a small balance.  Anything <9% usually gets the best FICO impact.  Some folks play around and find a sweet spot at 3% or 5% or whatever.  I've played around and haven't found such a thing as a sweet spot - but I do lose points if I go above 9% utilization on a card. YMMV, of course, so you'll want to see exactly how a small balance vs. no balance on one card affects your individual FICO.

Has the new account reported on your CR's yet?  If so, did it report with a balance?

And, by any chance have you pulled a FICO score here?

[Walt_K]

General consensus is that you get the most FICO points by letting a small balance report on one card.  Something less than 10% of the limit of that card.  This is for reporting purposes.  Your card will report its balance to the CRAs as of the statement date.  It will not update again until the next statement date.  So, knowing that, you can control what is seen on your credit report.

You have a $500 limit.  So you want less than $50 to report each month.  Before your statement date, pay your card down to $49 or less.  Actually, someone will need to remind me if utilization rounds up or down, it may need to be $45 or less to be 9%.  You could be safe and just pay it to below $5.  After your statement generates, pay off the remaining balance.  That way you still don't pay any interest.

Another thing to keep in mind with this is that it is only for maximum score purposes.  There really isn't anything wrong with you paying it off immediately and having a $0 balance report.  Especially if you aren't seeking new credit like a mortgage or an auto loan.  You don't have to play this game of manipulating your reports every month if you don't want to.  Where it would be important is if you were seeking new credit and your score was right near an interest tier break.  In that case, you would want every last point you could get.  So if you are planning to seek new credit, you would want to do this at least a month or so in advance so that your report has time to update.

[Anonymous]

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@Anonymous wrote:

Hey toolie, you're doing great!  Congrats on your new card and taking great care with it.

When you only have one revolving account open, I would recommend allowing the card to report a small balance.  Anything <9% usually gets the best FICO impact.  Some folks play around and find a sweet spot at 3% or 5% or whatever.  I've played around and haven't found such a thing as a sweet spot - but I do lose points if I go above 9% utilization on a card. YMMV, of course, so you'll want to see exactly how a small balance vs. no balance on one card affects your individual FICO.

Has the new account reported on your CR's yet? --No, I don't believe so. I have SW and have not received an alert

 If so, did it report with a balance?

And, by any chance have you pulled a FICO score here?-  Yes, I have SW and Quaterly FICO Monitoring.

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Thanks so much for all the answers, I think I understand it.  I can go ahead and pay off most of the freezer purchase but leave a small balance to report.  This has to be done by the next statment date. 

I  need to maximize my score here inthe next few months to apply for some FSA loans.

[Anonymous]

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@Walt_K wrote:

General consensus is that you get the most FICO points by letting a small balance report on one card.  Something less than 10% of the limit of that card.  This is for reporting purposes.  Your card will report its balance to the CRAs as of the statement date.  It will not update again until the next statement date.  So, knowing that, you can control what is seen on your credit report.

You have a $500 limit.  So you want less than $50 to report each month.  Before your statement date, pay your card down to $49 or less.  Actually, someone will need to remind me if utilization rounds up or down, it may need to be $45 or less to be 9%.  You could be safe and just pay it to below $5.  After your statement generates, pay off the remaining balance.  That way you still don't pay any interest.

Another thing to keep in mind with this is that it is only for maximum score purposes.  There really isn't anything wrong with you paying it off immediately and having a $0 balance report.  Especially if you aren't seeking new credit like a mortgage or an auto loan.  You don't have to play this game of manipulating your reports every month if you don't want to.  Where it would be important is if you were seeking new credit and your score was right near an interest tier break.  In that case, you would want every last point you could get.  So if you are planning to seek new credit, you would want to do this at least a month or so in advance so that your report has time to update.

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Utilization does round up.  So pay down to <9% for best results.

[p-]

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@Anonymous wrote:

Hi, I just recently was approved for a Capital One card with a $500 limit.  This is my first credit card since going through some rough times back in 2009.  Admittedly, I haven't ever used a credit card correctly and have always carried a balance.  I really didn't want a credit card but was told it should help boost my score since I had no revolving tradelines reporting. 

My questions:   I want to use this card to the full effect.  Meaning I would like to be smart and have it affect my score as it should.  I have been told I need to use it, and pay it off every month.  Fine and dandy that is not an issue anymore.  I did have to pay an annual fee of $39.00, I just got that first statement, and paid the $39.00 immediately rather than waiting until my statement payment date of July 28.  Now yesterday, I bought a freezer, with a purchase price of $186, I decided to put it on the card and try out this use and pay it off thing.  How do I do this the right way?  Do I need for a balance to post on it at the next statement date?  My intention was to pay this off immediately but am hearing you should have a small balance say 5% which will post to the CRA each month?????  I would much rather just pay it off and have hte balance 0 each month.

Needless to say I am cornfused.  Can someone lay this out for me on the best way to use this card to help boost my score?  Thanks.

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A suggestion; if you find it hard to resist the temptation to run up the card, there's a trick a radio guy said.  Set the card up as the source for an auto-pay bill.  Most of us have one, like netflix, or cable, or whatever.  Make sure it's something that is not too variable.  Leave a little bit on the card, but pay off most of it each month.  Then, to remove the temptation, put the card in a ziplock bag full of water, and throw it in your new freezer.  That's the best way to freeze a credit card but still get the benefit on your score.  If you really do need to use it you will have to thaw it out and think about whether it's worth doing.