When and how much to pay each month?

[Anonymous]

This is my first post and I apologize if the answers are obvious or easy to find.  I tried searching, but I don't think I was able to find the exact answers to my questions. 

For a while I was using my Costco Amex for 95% of my spending every month (sometimes up to $3000). Then when I was refinancing my mortgage, I saw on my credit report the following - "AMOUNT OWED ON REVOLVING ACCOUNTS IS TOO HIGH" (Experian), "PROPORTION OF BALANCE TO HIGH CREDIT ON REVOLVINGS ACCOUNTS" (TransUnion, Equifax). Then after doing a search and reading some of the posts here I realized that I should instead be spreading my spending across multiple cards to keep the revolving balance low (right?).

So now I've started using 3 different cards (AmEx, VISA, and MC).  My question is should I be paying the "statement balance" on the cards after the cycle closes and the individual websites actually start showing the statement balance, or should I be paying the "current balance" few days before the statement close date? (and is this what "PIF" means?).  I used to pay the current balance on the AmEx for a while, then started paying the statement balance a few months ago.  My scores seem to have gone down a tad and are just hovering above 800 (805, 808, 801 for Experian, Transunion, and Equifax respectively) and I don't want them to go under 800! 

Thanks much!!

[JoeBJay20]

Welcome to the forums.

Credit card utilization accounts for 30% of your FICO score.  Utilization is the percentage of your available credit that you're using, in other words your total credit card balances divided by the sum total of your credit limits.  For example, if you have $10000 in total credit card limits and $3000 in total balances, your utilization is 30%.  FICO scoring takes in to account both individual card utilization and total combined utilization.  For maximum scoring, you want your utilization to be at 9% or less.  

You want to pay before the credit bureau reporting date.  For most cards, it's the date of the statement, but a select few report on the last business day of the month.  You can search the forums for your particular cards to see when they report to the bureaus. 

Are those true FICO scores you're listing?  I ask because Experian scores are no longer sold directly to the public, and are only available with a mortgage application or if you're a member of PSECU, a credit union in PA.  If they are indeed FICO scores, then they're excellent, once you get to 760 you're in the top bracket, and there's no credit advantage once they go higher.  In terms of credit, there is no difference between a 761 and a 849.  

[haulingthescoreup]

Hi, welcome to the forums!

If you haven't already, please read Understanding Your FICO ® Score and Credit Scoring 101 (at least the first post.)

These will give you the background knowledge you need to understand what you read here on the forums.

The comments that you posted appear to have come from FAKO (non-FICO) credit monitoring services. The links above will help you understand the difference between FAKO's and FICO's. Not only are the scores worthless, but so is the advice, generally speaking.

Your scores are awesome. Obviously, you have perfect credit history, and the only variable is the reported balances.

In this day and age, it's suicide to carry CC balances. Banks are reducing the amount of extended credit on their books, and the easiest way is to reduce credit limits or close CC's entirely. They do this even with excellent customers like you. And they love to find customers with high balances --it makes their decisions easier. Furthermore, even if you pay off your CC balances every month (we call this PIF'ing --pay in full), if you wait until the balance posts on your statements, that figure is reported to the CRA's (credit reporting agencies = credit bureaus), and it makes it look as if you're carrying high balances, even when you don't.

For scoring purposes, at a minimum, you should go online about 5 days before your statements drop and pay your posted balances down to 9% max of each card's CL (credit limit). Once the statement drops, and that new figure presumably posts, go ahead and pay off the rest. A much simpler approach is to completely pay off your cards online 5 days before the statement date, so that they will report a balance of $0. Oddly, your scores will be hurt if they all report $0, so if you need to optimize your scores, let one report $10-20, and then pay it off.

And one difference in CC reporting is that AmEx doesn't update until nearly a month after the statement drops, so anything that you do takes 2 months to process through. So this is definitely a card to pay in full before statement date.

Anyway, I hope some of this helps. Please keep reading here on the forums and learning more about how you can make the credit system work for you!

[Anonymous]

Thanks for the advice!  To answer your question, I got these scores when refinancing my mortgage.

[haulingthescoreup]

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teej wrote:
Thanks for the advice!  To answer your question, I got these scores when refinancing my mortgage.

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Oh, cool then, you most likely have:

EQ FICO (Beacon 5.0)
TU FICO (probably FICO Risk Score Classic aka EMPIRICA 04; maybe 98)
EX FICO (Experian/Fair Isaac Risk Model Version 2)

You're way ahead of most of us, at least in knowing what your EX score is!

[Anonymous]

Thanks so much! So let me see if I got this straight.  I should pay off the entire "current balance" on the AmEx card every month before the statement close date.  For the other cards, I should, ~5 days before stmt close date pay them down to at least 9% of the card limit, or down to zero (but not the entire amount for one of the cards).  Then after statement close date pay off the statement balance.  Did I get that right? Thanks again, I'm so glad I found this forum!!

[Uborrow-Upay]

Awesome scores, teej!

A whole lot of folks here would love to be in your position...you could take a 40 point hit to your FICOs and still have excellent credit!

Congrats!

(Feel free to let us know how you got to this enviable position over the years).

[BungalowMo]

"My scores seem to have gone down a tad and are just hovering above 800 (805, 808, 801 for Experian, Transunion, and Equifax respectively) and I don't want them to go under 800! "

Oh...You Too????  (then someone slapped me awake!)  

Sweet scores my friend!  And you're new here?  Looks like you could step in & teach some of us a thing or 2.

[Anonymous]

LOL I really am not sure why exactly I have these scores.  I'm 31, moved to the U.S in 1995 for college, and the first time I got a credit card was in college.  From what I remember I had a few cards by the time I graduated, but I don't think I was good at paying the full balances.  I actually had racked up quite a bit of debt (~15k or so) in my first couple of years after college so I'm sure my scores were pretty bad then. Then I got my parents to help me pay off the debt, and ever since then I've been good about paying all my credit card bills on time and at least the statement balances.  Like I said in my first post though, I was actually paying the full balance on the AmEx for a couple of years every month. 

I think using my credit cards a lot in the beginning jumped up my credit lines (I have anywhere between 15k-30k in individual credit lines), but I haven't been carrying balances the last 5-6 years. 

I pay my bills on time, but there have been 3-4 times when I didn't.  I always tried to call them up and get them to waive the fine and request that it doesn't get reported.

I don't have any student loans and both my wife and my car are paid off.  I have a mortgage.

Hope the info helped.  Let me know if you have specific questions.