How do payments affect secured credit card reporting to credit bureaus

[Anonymous]

We have recently put money into our credit union to secure credit cards.  I put in enough for my wifes account and also in an account for me to allow us to charge our normal monthly walmart shopping on credit (the secured credit union cards) without going over 50% of available balance.  FIrst of all that is that correct in my understanding from what I read on here that going over 50% even on a secured credit card is not good?

Then my absolute question is one that my wife and I have discussed at odds.  The bank being the issuer of our secured credit card is also our banking bank so we can electronically make our monthly payments to them.  My wife thinks when we buy something we can and should just transfer the same amount to a payment to the card right away.  I have been in disagreement with her because we will want a statement to drop and then pay the amount so it reports to the credit bureaus - am I right?  Will they report activity or just the monthly closing balance to credit bureaus?  Then do you think it is better to mail a payment or pay online or will it make no difference?

Thank you.

L

[guiness56]

Hi and welcome to the forums.

You need to keep your balance under 10% and pay before the statement posts for optimal FICO scoring and to keep from paying interest.

A good rule of thumb is to only use half of your available credit cards.  Keep the balances at 10% or below. Pay those in full before the statements posts to keep from paying interest.  Keep the other half of your credit cards at a 0 balance.  Never have all of them reporting a 0 balance at once.

[Anonymous]

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@guiness56 wrote:

Hi and welcome to the forums.

You need to keep your balance under 10% and pay before the statement posts for optimal FICO scoring and to keep from paying interest.

A good rule of thumb is to only use half of your available credit cards.  Keep the balances at 10% or below. Pay those in full before the statements posts to keep from paying interest.  Keep the other half of your credit cards at a 0 balance.  Never have all of them reporting a 0 balance at once.

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I think the above is a little confusing. To clarify:

Use as much of your CL as you want with busting the spending limit.

Before your Statement Date, get your CC balance under 10% of the CL. If you have more than 1 CC, get at least half to 0%.

After the statement date, PIF before the Payment Due Date to avoid interest charges.

Thus, if a card ends its billing cycle and sends statements on the 25th and due date is 20th of every month:

On 1st-20th, charge whatever you need.

By the 22nd, electronically pay off the balance to under 10% of CL

On the 24th, check that payment has cleared and stop using the card.

Morning of the 26th, verify statement has posted, send payment to PIF balance

On 28th, verify balance has gone to $0, and start charging again.

[guiness56]

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@Anonymous wrote:

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@guiness56 wrote:

Hi and welcome to the forums.

You need to keep your balance under 10% and pay before the statement posts for optimal FICO scoring and to keep from paying interest.

A good rule of thumb is to only use half of your available credit cards.  Keep the balances at 10% or below. Pay those in full before the statements posts to keep from paying interest.  Keep the other half of your credit cards at a 0 balance.  Never have all of them reporting a 0 balance at once.

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I think the above is a little confusing. To clarify:

Use as much of your CL as you want with busting the spending limit.

Before your Statement Date, get your CC balance under 10% of the CL. If you have more than 1 CC, get at least half to 0%.

After the statement date, PIF before the Payment Due Date to avoid interest charges.

Thus, if a card ends its billing cycle and sends statements on the 25th and due date is 20th of every month:

On 1st-20th, charge whatever you need.

By the 22nd, electronically pay off the balance to under 10% of CL

On the 24th, check that payment has cleared and stop using the card.

Morning of the 26th, verify statement has posted, send payment to PIF balance

On 28th, verify balance has gone to $0, and start charging again.

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Not confusing to me.  You pay before the statement post.  You keep your reporting balance under 10%. 

You USE half of your CC.  You don't use the others.

[RobertEG]

I agree 100% with your wife.

You can diddle and daddle about statement dates,. etc., and it you take only the FICO view, all that matters  is the balance due upon issuance or their next statement.

You charge. and pay right away, the charge and payment post, and you dont run the risk of late payment. But if a statement hits, interest wil; also hit.

Charging up high, waiting for it to report, then paying it off after statement date may end up at the same point, may not have immediate FICO impact, but the world does not revolve around FICO scoring.  You pay interest on unpad balance daily is still there.

[Jazzzy]

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@RobertEG wrote:

I agree 100% with your wife.

You can diddle and daddle about statement dates,. etc., and it you take only the FICO view, all that matters  is the balance due upon issuance or their next statement.

You charge. and pay right away, the charge and payment post, and you dont run the risk of late payment. But if a statement hits, interest wil; also hit.

Charging up high, waiting for it to report, then paying it off after statement date may end up at the same point, may not have immediate FICO impact, but the world does not revolve around FICO scoring.  You pay interest on unpad balance daily is still there.

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I'm not sure what the above statement means, but you won't get interest charged just because a statement cuts. Interest will be charged if you don't pay the entire balance by the due date.

The answer to your question is somewhat dependent upon your goals. If your goal is to build credit, you can charge up to the limits on your cards and simply pay the bill when you get the statement.

If you are trying to maximize your FICO scores to apply for new credit, you will want to pay before the statements cut. Because the amount that posts to your statement will affect your utilization ratio, a high ratio could affect you negatively when you apply for new credit. To tweak your FICO scores, the method stated above about paying most/all of your balance before the statement cuts will be beneficial.

At our house, we pay our balances off before the statement cut date. We don't pay during the month after each charge. We also don't quit using the cards. That way we end up with a couple of small balances showing every month.

Are you thinking of applying for new credit any time soon? (Also...welcome to the forums!)

[Anonymous]

Our goal is building up our credit scores.  We are just over 2 years since filing CH7 and the only thing we have carrying through is an auto loan that we re-affirmed.  It is a loan we took just ahead of the filing by the recommendation of our lawyer.  We applied for some store cards at 6 months out and were declined.  We stopped testing if we could get any new credit at that point and had to go out almost 2 years to get these secured cards (money was tight).

Now we want to build good credit, never run balances, never get fees, and get into the excellent realm of scoring.

We went from low 700s to mid 600s after filing.  We haven't checked FICO scores in a long time but will do so a few months into our secured cards use.

L

[Anonymous]

I wanted to offer words of encouragement and some insights too.

I’m 7 years + 1 month removed from a Chap 7 BK, so I empathize with your situation.

I purposely did not begin rebuilding my credit until 3 years ago when I was approved for 2 unsecured VISA cards + Sears and Kohl’s store cards – all within 90 days.  At the time my TU FICO was 668 and EX was 682.  (As a free service to members, one of the credit unions I use posts quarterly FICO scores from EX to their members online accounts.  The CU also discloses the individual composite scores from each scoring category used to calculate the total FICO score, so members can see which category scores are good or deficient.  The other credit union I use posts monthly FICO scores from TU.)

I regularly use one of the VISAs while the other one is used about 2 dozen times throughout the course of a year and only for nominal purchases – seldom exceeding $100 despite a generous credit limit.  The store cards are rarely used, but I do so intermittently just to keep them active. 

By mid-summer ’09, all IIB TLs had dropped off my reports.  The only DEROG staining my reports is the public record from my BK filing.

Over the course of the past 3 years, my total utilization of credit cards has never exceeded 4%.  Additionally, I always pay on time, and without fail my cards are paid in full each month.  As a result, my TU and EX FICO scores have steadily risen to the 744 to 756 range.  And as a gift to myself, every year near my birthday, I obtain my FREE annual reports and thoroughly review them for accuracy.

My oldest active account is 16 years, however I have written confirmation from 2001 that it was closed as per my request, yet for whatever reason the creditor continues to report it as “Open/Never Late”.  From what I understand, this circumstance could be benefiting me so I’m keeping quiet about it.  The AAoA is 11 years.

Then in early March ‘10, I managed to pay off $12.5K in student loans within 9 months.  By happenstance, the payoff coincided within days of the 7 year anniversary of my BK filing.  Late last month when the credit unions posted my updated FICO scores to my online accounts, I was pleasantly surprised to see they had risen to 756 and 768.  Wow!

I don’t know if the higher scores are attributed to the student loans being paid off, or the 7 year aging and lessening impact of the BK filing, or a combination of both happenings, but I marveled at the results.

The timing of it could not have been better because my 15 year old car was on its last leg and I needed to replace it.  With the higher FICO scores posted in late March, I purchased a new truck.  In doing so, I was approved for 0% financing for 5 years + $0 down, although I was prepared to make a sizeable down payment.  With the loan approval, I learned my EX FICO had risen another 4 points to 772.

It’s been a long haul but I can genuinely say that discipline, diligence and a bit of time has its rewards.  My advice to you is to be wise, disciplined and persistent, and be unafraid to make sacrifices.

Best wishes.

[Anonymous]

Hi forty5ford (that's gotta be cool, btw),

Congrats on your excellent success.  It's good for people to see that, with work, life can move forward - and beautifully - after a BK.  Thanks for posting this!

Could you let us know which CU is giving your scores?

And are you sure they're FICO-branded scores?  The reason I'm asking is that I'm surprised to see a score over 760 with a BK still reporting - at least on FICO. 

And I'm sure we have a slug of folks who would love to know how they could get their hands on an EX FICO.

If you could update us, we'd sure appreciate it.

Congrats again!!!

[Anonymous]

I bank with Purdue Employees FCU, which is affiliated with Purdue University in West Lafayette, IN, and Public Service Employees CU in Denver, CO.

With regards to your question about whether they are FICO-branded scores, the answer is a 'yes'.  Several months ago I was skeptical about this issue because of the way my scores were steadily rising and to unanticipated levels.  As a result, I spoke to both credit unions about the issue and they confirmed their scoring methodologies are only FICO-based.

Also, a further point of clarification.  It is entirely possible that my recent high FICO scores might be attributed to the BK being removed from some of my reports.  I make particular mention of this possibility because nearly 90 days ago, I mailed two letters under separate cover to all 3 CRAs respectfully asking them to remove the BK public record from my reports as a goodwill gesture.  I pleaded my case and I asked for "mercy".  In short order, EQ denied my request; however, I have not received responses from TU or EX.  Since that time, I have been operating under the assumption that my requests to TU and EX were denied just like EQ.

However, given the way my scores have risen in very recent weeks, I am increasingly thinking that maybe afterall the BK was removed from TU and EX.  My b-day is in June, so in late May or early June I will obtain my free annual reports.  At that time I will have tangible documents in hand then be able to either confirm or deny it for myself.

I hope this answers your questions.