Credit Card usage question?

[9110]

I recently opened two credit cards. I'm trying to rebuild my credit. I've activated both cards but have not used either yet. (Although one of them has an annual fee that was charged to the card)   My question is, how should I use the card to rebuild my credit? What percentage of it should I use a month? And is it better to pay it immediately (should I go home after buying something with it and pay it?) or to pay it in full when the bill comes? 

I hope I posted this in the right area.

Thanks in advance!

[Anonymous]

Hi 9110,

Some folks will chime in with more info, but to me these are the key things to keep in mind.

Watch your reported balances. That's usually the statement balance (unless your card is HSBC or USBank).

Keep all but one card reporting a zero balance.  (The balances can be anything you want them to be during the month, though)

Keep the remaining one card reporting less than 9%.

Always PIF - never pay interest.

Use the cards on a regular basis.  Monthly, bi-monthly, something like that.  Or more.

Learn how to manage your cards online - know how long payments take to post, etc.

Congrats on your new cards!

Who did you decide to app with for your new cards?

[9110]

beamMEup -- Thanks for the response. To answer your question, one of the cards is a Best Buy MC, the other is First Premier. 

[9110]

Let me make sure I understand you correctly.

I can use all of my credit cards as much as I want, as long as I pay them all off when the bill comes?

ONE credit card, I shouldn't pay in full, but instead pay so that it has a balance of less than 9%

Is that correct?

[BrandonSS]

correct.  You will need to pay it down to 9% or less before the statement date.  You can call customer service and ask what your statement date is if you dont know yet.  Then, once your statement posts, you can pay the small balance in full.  The other card you just pay off in full before the statement date. 

[Anonymous]

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@9110 wrote:

Let me make sure I understand you correctly.  You're really close.

I can use all of my credit cards as much as I want, as long as I pay them all off when the bill comes?  Yes, you can use your credit cards as much as you want BUT pay the balances down to zero for the reporting date.  The reporting date is almost always the statement date (and the statement date is noted on every statement). 

(There are a few, i.e. HSBC and USBank, which report to the CRA's on the last business day of the month rather than the statement date.)

ONE credit card, I shouldn't pay in full, but instead pay so that it has a balance of less than 9%,  One card should have a less than 9% balance on the reporting date, which should be paid immediately after to avoid paying interest, or potentially late fees.

Is that correct?  If you pay them off after the bill comes, you will still be reporting high balances.  You do not want to report high balances.

This is one of the FICO-isms that is most helpful to folks and perhaps least commonly understood.  For example, if I have a $1000 CL and use $900 of it during the month but have not paid anything before the statement cuts, it will report a $900 balance on the statement.  If I pay it when the bill comes, FICO sees the reported $900 balance which is 90% utilization - they do not see that I have paid it to zero.   On the other hand, if I pay it in total before the statement cuts, the statement balance will be $0, and FICO sees it as 0% utilization.  A significant difference to FICO and your score.  Just a matter of timing. 

Also note that your due date must remain consistent according to the new credit card act.  Your statement date can, and often does, move around a few days each month.

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[9110]

Got it! Thanks so much for your explanation. I got a 10 point increase (I have score watch) after activating my Best Buy card. Nothing from First Premier  yet though.

[203bravo]

Watch your reported balances. That's usually the statement balance (unless your card is HSBC or USBank).

What is it for HSBC?

[CapeCodder]

This is great information and clarifies it for those of us who are confused.  I made a small purchase yesterday(XMAS presents!), 6% utilization, and my statement date is 11/12.  I will pay it off in full right after 11/12 to save any interest charges but get the benefit of the 6% utilization. 

Thank you!!

[llecs]

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@CapeCodder wrote:

This is great information and clarifies it for those of us who are confused.  I made a small purchase yesterday(XMAS presents!), 6% utilization, and my statement date is 11/12.  I will pay it off in full right after 11/12 to save any interest charges but get the benefit of the 6% utilization. 

Thank you!!

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Unless the balance was $0, you'd want to PIF prior to the statement date if you want to save on interest. The CCC will calculate the interest on the statement date.