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Paying balance in full is amazing for credit!

Established Contributor

Re: Paying balance in full is amazing for credit!


@BrutalBodyShots wrote:

@Pikaboo-icu

Part of the problem is the urban myth that paying steady payments over time proves credit worthiness.

I admit, I believed that very thing until a few years ago.

I had a CC made a large charge and could have paid it off- instead like a dope, I payed decent sized payments over time..

Sadly, I think many people believe the same..Smiley Sad


I suppose it depends on what you mean by "proves credit worthiness" and also what constitutes "steady payments."

 

If you mean "improves score" I would tend to agree with you.  There's no [scoring/credit] benefit in the long term if you have a CC with a $1000 balance that you pay off with a single $1000 payment today, or if you just make minimum payments on it for 5 years and finally pay it off.  5 years from now one won't have a higher score or exhibit any superior credit worthiness if they made 60 payments verses 1.

 

If someone is making "steady payments" simply from being a Transactor and paying in full every month, that may be considered exhibiting or proving superior credit worthiness over time.  Upon a MR or if trended data is looked at, someone that is using a CC every month and always paying it off for a period of 5 years is going to look "better" than basically any other scenario... be it carrying a balance, not using the card at all, using the card once every 12 months, etc.   


In my case; I would make a large purchase, using the $1000 example and pay it off $200. at a time. Then not charge again for some months..

I believed that would increase my score and make me seem a good risk to the CC company/bank.

I learned over time to use my cards daily, rather than cash & PIF or nearly each month and it helped.. A lot. 

Scores went up and CLI's seem to follow. 

 

I see what you're saying- I suppose my "old way" could work out too- perhaps I just wasn't consistent enough as I used my cards sporadically. 

CHEERS

Message 11 of 17
Established Member

Re: Paying balance in full is amazing for credit!

My feelings are a mixed bag on this one. While it is good to pay off each card every month for utilization purposes there are times when paying over time completely makes sense. I have a couple of cards I use daily just as I would use cash and for those I pay off monthly just before the statement posts and I still get all the rewards (cash back, point, etc...). On the other hand, my car insurance renews next month and I generally pay that on a month to month basis, and, if I pay that through my agent or to the ins company directly then I generally accrue some interest. So, I have a CC that has 0% interest for the next 6 months and I will use that card to pay the premium in full at renewal date and save a  few bucks. I think each person has to have a look at their own individual financial situation and go from there and learn from their own experiences. Ive also found that multiple credit cards (5+) creates more of a headache than anything and room for error and I personally dont care for it.

Message 12 of 17
Valued Member

Re: Paying balance in full is amazing for credit!

Im in the same boat! I have a cpl cards that were in the high 90s% utilization and paid em off in time to post on this weeks credit score updates, im wanting to see my score jump form 669 to ??? The myfico simulator said ill see 799 but folks here say its not dead on, so Ill just have to wait another day or 2 and see exactly how accurate the simulator is!

Starting Score: 669
Current Score: 773
Goal Score: 850


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Message 13 of 17
Contributor

Re: Paying balance in full is amazing for credit!

What was the resulting fico score jump from paying down your cards? I'm interested to know how it went.
For Me Starting FICO 8 Score 4/1/18 EX 599 TU 602 EQ 609
Current FICO 8 Score 6/1/18: EX 620 TU 617 EQ 623
Beginning Mortgage Score 4/1/18: EX 537 TU 592 EQ 578
Current Mortgage Scores 6/1/18 EX 607 TU 601 EQ 613
Hubby Starting FICO 8 Score 4/1/18: EX 505 TU 543 EQ 484
Current FICO 8 Score 6/1/18: EX 581 TU 581 EQ 569
Beginning Mortgage Score 4/1/18: EX 494 TU 512 EQ 548
Current Mortgage Scores 6/1/18 EX 577 TU 598 EQ 582
Goal Score 7/1/18: 640 Across the Board


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Message 14 of 17
Community Leader
Super Contributor

Re: Paying balance in full is amazing for credit!


@Janus wrote:

@AverageJoesCredit wrote:
0 credit card debt is my goal. Awesome jobSmiley Happy

Then why do you keep asking BoA for CLI's?  Smiley Wink JK lol


Good credit lord , it's all about breaking down the credit racial barriers my good MFerSmiley Happy. If someone like me can get them to change their policy on CLI, then I can finally graduate to SlightlyAboveAverageJoe, or at least rate a hard 6 on the She's Out Of My League guy scaleSmiley Wink

OCTOBER 26 2020
Message 15 of 17
Established Contributor

Re: Paying balance in full is amazing for credit!


 wrote: Part of the problem is the urban myth that paying steady payments over time proves credit worthiness. 

 I admit, I believed that very thing until a few years ago. I had a CC made a large charge and could have paid it off- instead like a dope, I payed decent sized payments over time.. 

Sadly, I think many people believe the same..Smiley Sad


Agreed. And that was even preached by some lenders and so-called people in the know years ago, to simply pay your minimums on time every month. So it created a culture for decades with some people. After all many of us never knew our scores or were allowed to see them.

 

In actuallity it wasn't until a few ears agoa bfore my finacial situation improved, which lead me to ba able to pay off CC debt. So for the last couple I just let them sit empty, only using them to prevent closure. It simply didn't enter my mind you use CC to pay for everything, tand then just pay them off at staement cut. 

 

But I dod feel there's  a lot of people that think making the minimums it just fine, as well a being 40-60% Util.

Message 16 of 17
Regular Contributor

Re: Paying balance in full is amazing for credit!


@Flags wrote:

My feelings are a mixed bag on this one. While it is good to pay off each card every month for utilization purposes there are times when paying over time completely makes sense. I have a couple of cards I use daily just as I would use cash and for those I pay off monthly just before the statement posts and I still get all the rewards (cash back, point, etc...). On the other hand, my car insurance renews next month and I generally pay that on a month to month basis, and, if I pay that through my agent or to the ins company directly then I generally accrue some interest. So, I have a CC that has 0% interest for the next 6 months and I will use that card to pay the premium in full at renewal date and save a  few bucks. I think each person has to have a look at their own individual financial situation and go from there and learn from their own experiences.


Most years I do the same thing! Ideally I time it to app for a card with a big sign up bonus, and then I pay a year's worth of car insurance with that card. Get the discount, get the bonus (and use that to help pay it off) and use the 0% interest promotion to give me time to pay it down. I always paid it down in a few months.

 

Last year I didn't app for anything, but still purchased a year's worth at a time. Managed to avoid interest....barely!

 

That being said, my goal is definitely to be able to have the money for a year's worth of insurance already saved up and ready to pay at the time that I use my credit card to purchase it. Because PIF all the time feels *so* much better to me! In the budgeting software I use (YNAB) you can set a goal to have a certain amount saved in a certain category by a certain date. And it will tell you how much you need to put in there each month, or how much more you need to add, to stay on track for that goal. It's super helpful!

I'm currently at PIF except for emergency expenses where it can't be helped. Now I'm working on saving up so that I won't need to use the credit card float as often, ideally not at all. It's a nice safety net to have, but preferably not your only one, IMO!

Message 17 of 17