Using a Credit Card to build Credit: When is the best time to pay balances?

[Anonymous]

Less than a month ago I opened a CashRewards World MasterCard with USAA to help build my credit (I’m trying to get above 740 before I apply for a mortgage, and had a low variety of credit utilization on my report). I know that I need to keep my balances low and pay on time every month, but I am afraid that I may be going overboard in regards to these 2 strategies. I have detailed my strategy thus far below, and would really appreciate some insight (as far as whether or not it will boost my Credit Score), as well as any tips you may have.

• The Credit Card is used for just about every purchase that my wife and I make, as well as for every bill that we pay. However, we only use the card when we have enough money in our checking account to pay it off IMMEDIATELY. So far, I have been paying the balance in full as soon as charges post to the account (usually within 1-2 days), and thus I consistently maintain a $0 (or very low) balance.

• First question: Will paying off my balance so quickly that I consistently have a $0 balance (or close to it) do anything to boost my credit score each month? Or will this lead to USAA reporting a $0 balance to the Credit Bureaus, making it look like I don’t use the card or make payments? (I assume that if this were the case, it would do nothing to boost my credit score)

• Second question: Should I let these charges add up, so that I have a balance at the end of each billing period, and then pay the balance in full? Or will the Credit Bureau be able to see that I have used the card dozens of times over the previous month, repaying the debt in full shortly thereafter? (If so, will this help my score?)

• Third question: When does USAA/MasterCard typically report to the Credit Bureaus, which ones does it report to, and when do USAA Credit Card billing periods end (or does it vary by account)?

Thanks in advance for any feedback, I really appreciate you taking the time to read over and respond to my questions.

[ojefferyo]

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@Anonymous wrote:

Less than a month ago I opened a CashRewards World MasterCard with USAA to help build my credit (I’m trying to get above 740 before I apply for a mortgage, and had a low variety of credit utilization on my report). I know that I need to keep my balances low and pay on time every month, but I am afraid that I may be going overboard in regards to these 2 strategies. I have detailed my strategy thus far below, and would really appreciate some insight (as far as whether or not it will boost my Credit Score), as well as any tips you may have.

• The Credit Card is used for just about every purchase that my wife and I make, as well as for every bill that we pay. However, we only use the card when we have enough money in our checking account to pay it off IMMEDIATELY. So far, I have been paying the balance in full as soon as charges post to the account (usually within 1-2 days), and thus I consistently maintain a $0 (or very low) balance.

• First question: Will paying off my balance so quickly that I consistently have a $0 balance (or close to it) do anything to boost my credit score each month? Or will this lead to USAA reporting a $0 balance to the Credit Bureaus, making it look like I don’t use the card or make payments? (I assume that if this were the case, it would do nothing to boost my credit score)

• Second question: Should I let these charges add up, so that I have a balance at the end of each billing period, and then pay the balance in full? Or will the Credit Bureau be able to see that I have used the card dozens of times over the previous month, repaying the debt in full shortly thereafter? (If so, will this help my score?)

• Third question: When does USAA/MasterCard typically report to the Credit Bureaus, which ones does it report to, and when do USAA Credit Card billing periods end (or does it vary by account)?

Thanks in advance for any feedback, I really appreciate you taking the time to read over and respond to my questions.

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#1 If you have a $0 balance it will report a $0 balance. Will not do anything to your scores

#2 Let the charges add up then pay it off after the statement cuts

#3 They should report to all 3

[Anonymous]

Call and ask them when they report. Check your credit report monthly to make sure.  For example BoA reports the day after the statement is cut for me! 

[Anonymous]

Thanks so much for the quick responses, I really appreciate your answers. I'll wait to pay off my charges until I get our first statement.

[Anonymous]

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@ojefferyo wrote:

#1 If you have a $0 balance it will report a $0 balance. Will not do anything to your scores

#2 Let the charges add up then pay it off after the statement cuts

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1: wrong - everybody agrees that having $0 balance is good except for 1-2 cards

2: wrong - if I understand correctly the OP has ony this 1 card. When he puts all his household charges on that 1 card he'll have a UR far beyond what's good for a mortgage application.

I'd suggest a different route: keep on paying off your card asap. But for the last payment before the statement cuts, pay a few dollars less. This way your card would report a tiny balance, like $200 or whatever, and then you pay it off with your next scheduled payment AFTER the statement has been reported.

[Anonymous]

1. The lower the balance at time of statement = lower utilization = better for your credit score. If you have only one card, leave 1-9% of the balance at the time the statement cuts. This will boost your scores the most. If you were to have multiple cards, you would get the best result by leaving all cards at 0% and one at 1-9%.

2. Pay your balance so that only 1-9% of the limit shows on your statement.

3. MOST credit cards report the balance when the statement cuts to the bureaus. Your card should report to all three bureaus.

All of the above info is based on the credit card reporting to the bureau at the time the statement cuts. I would call to verify that this is correct.

[Anonymous]

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@Anonymous wrote:

 If you were to have multiple cards, you would get the best result by leaving all cards at 0% and one at 1-9%.

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I do not understand the logic of having one card at 10% uti and the rest at 0.  How is  this any different than having all cards PIF?

[Anonymous]

Anecdotally, having one card at 1-9% and the rest at zero will yield the highest credit score. The Fico universe is a strange, strange place.

[Anonymous]

Thanks for all of the feedback! The different points of view are very useful.

One more question: Anyone know what credit bureau USAA pulls your report from when you apply for a mortgage?