Lower Credit Utilization by pre-paying credit cards

[Anonymous]

I'm new to FICO analysis and have a question in an effort to bring down my credit utlization.

We use our credit cards as a convenience and pay the balance in full each month.  However, my credit utlilization is high and i would like to bring it down.

General scenario:

We have 2 cards that we use... one on average $3K per month (card1) and the other $1K per month (card2).

If i send the first credit card company $4K and still send an additional check each month for the current charges, i will have a negative balance (the credit card company would OWE ME money) anywhere from $1K-$4K (depending upon the time in the cycle).

QUESTIONS:

When i have a negative balance would this be reported as a 0 balance OR as a negative balance?  If reported that i've overpaid and a negative balance, would this postively effect my credit score or is it possible that this is somehow viewed negatively?

If i 'pre-paid' both credit cards in this manner, would this be a good or a bad thing since then all my credit cards would show  a 0 balance (i read somewhere on here that you do want to keep at least have a small balance reported mid-cycle on at least one card)

Thank you.

[llecs]

Welcome!

If you have a negative balance on your statement, whereby the CC owes you money, it will get reported as $0 vs. the neg. balance.

While it is an odd fact that all $0 balances is a small score dinger, it's nothing to fret over. Utilization is a snapshot in time and keeping $0 balances won't do any permanent damage. You can let $1 report the following month and your FICO will rebound.

It's all about gaming the system and working within it. Virtually all CCs will report the balance you had on the statement date, and report that balance to your CRs inside a few days of that statement date. YMMV on the creditor. So the key is to time your payment(s) to where it clears and reflects what you want it to reflect by the statement date.

[Anonymous]

Thanks for the info.

So of these two options is one better than the other:

OPTION 1:

Send credit card1 a check which covers more than our average monthly charges... then still pay the bill amount each month.  This should (or corret me if i'm wrong) always give this card a 0 balance reported.  We will always have some type of charge on card2 so we won't be in a situation where all reported balances are '0'.

vs.

OPTION 2:

Following another poster, pay my credit card balances every 1-2 weeks which should lower my over all utilization since balances would only be 1/4 to 1/2 of the average montlhly balance (assuming equal spend throughout the month).

Is one option better than the other? (perhaps #1 is better since then only one credit card will show a balance, while option #2 both would have a balance... even though both paid in full by end of the month)

We will be applying for a loan/mortgage sometime in the future which is why i'm trying to get up to speed on this and understand how to make the best/right decisions.  Our score is 760+ but i'd like as much of a cushion as possible to protect against any drop if multiple lenders pull our score to quote us rates (i read how all mortage inquiries should be considered one pull within a 45 day period... but also read how some lenders don't properly code the inquiry and therefore could amount to more)

Thanks again for any additional help/insight.

[llecs]

Option 1 may not be available to you. Most CCs will not let you overpay the balance. Sometimes you can push through a payment via your bank's billpay, but there's always a risk of the creditor returning the overage to you. YMMV on the creditor.

Option 2 will not work. Your CC will report the balance you had on the statement date and will report that balance a few days after the statement date. In other words, if you keep a $0 balance  every single day for 29 days on a $1000 CL CC, and on the 29th day ring up a charge of $1000 on that CC, the balance that will report is not an avg. daily balance. The balance that will report is $1000. Remember, your CC only reports once per month to your CRs.

IMO, the best practice is to use the card if you have the $$$ in the bank. After each purchase, set aside that money and don't touch it. Make any required payment before the due date, but make a second payment just before your statement date. This payment would be sufficient enough to pay off the balance if the goal is $0.

And keeping $0 balances isn't bad. IMO, pay each card off monthly. Right before you app for a mortgage, let a small balance report to the statement and that eliminates the issue of the small ding many experience for all $0 balances reporting. And you don't even have to use your CCs monthly. Shelve them. Just be sure to use them for at least aa pack of gum or a cup of coffee somewhere every 3-4 months to prevent the CC issuer from closing them due to non-use.

[Anonymous]

Option 2 will not work. Your CC will report the balance you had on the statement date and will report that balance a few days after the statement date. In other words, if you keep a $0 balance  every single day for 29 days on a $1000 CL CC, and on the 29th day ring up a charge of $1000 on that CC, the balance that will report is not an avg. daily balance. The balance that will report is $1000. Remember, your CC only reports once per month to your CRs.

Thanks, but not sure if we're on the same page here or i may just not understand how 'balances' are reported:

Week	Amount Charged	Cumulative Charges	Weekly Check Sent	Balance
1	$600	$600	$600	$0
2	$600	$1200	$600	$0
3	$600	$1800	$600	$0
4	$600	$2400	$600	$0

Assuming he above brings us to statement date (a few days after Week 4)... wouldn't my balance be $0 since i was making payments all along?

If the credit card company reported my balance after Week 2, wouldn't the report be $0... or are you saying that my payments would not be applied to reduce the balance and therefore the reported balance would be $1200 (the cumulative total of 2 weeks of charges)

Thank you again.

[Anonymous]

Hmmm, reading this thread with interest.  

[marty56]

CC that I know you can go negative on:

RBFCU (a San Antonio local CU)

Sams Club (must pay in store though)

Ones I tried and failed:

Chevron (GE)

PNC

Sams Club (online)

[Anonymous]

Why not just pay outstanding balance right before statement closes so it reports whatever you like?

[Anonymous]

From what i read MOST (not all) report at the billing cycle closing date.  Given i'm not sure if we'll be looking for a mortgate in 2 weeks or 2 months, i just figured it would be easy to write one check to cover an 'extra' month of charges (which would give me the zero/negative balance), then continue my current bill paying habit of paying the bill when received.

[Anonymous]

I guess but seems like a waste to me. Recommend calling and researching when they report and pay few days before reporting. Yes pretty much always when billing cycle closes ( ie statement date). Good info to have for future. Also, forgot if your Amex is charge card, but Amex charge card balances won't be used in fico scoring for mortgages. So if Amex charge card, no need to manage its reported balance.