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Credit balance and payment? (move please?)
KurnDerak
Registered User regular
Registered User regular
Edit: Err... I thought I was in H/A not D&/orD. Oops. If a mod doesn't mind moving this?
I got my first credit card late November and have been trying to figure out the best way to handle the card to help work on my credit score.
My plan had been to more or less add the card in as a middle man for what I had been using my debit card for and the go and pay it off right away.
I've seen people say that leaving a balance can help, the reasoning I saw at least once was that it shows you can handle debt on the card, I've seen people say paying it all off helps, and I've seen that neither makes a difference as long as you make payments on time. At the end of the month, is the only difference between a balance and no balance just whether you pay interest or not and no real effect to credit scores?
I'd also noticed that keeping the use of the card below 30% of the credit limit can also help. The reason this is noteworthy is that my parents and I had planned to use my card to pay for school, and then they would pay it off. Is it more detrimental to do this than it is to not use the card for this? Card is a $2,500 credit limit card, school per semester is around $2,000-2,200 I believe.
Finally, is there any difference in paying off the card right away or waiting for the statement to come in? I wouldn't think so, but I've found that sometimes things work really weird.
I got my first credit card late November and have been trying to figure out the best way to handle the card to help work on my credit score.
My plan had been to more or less add the card in as a middle man for what I had been using my debit card for and the go and pay it off right away.
I've seen people say that leaving a balance can help, the reasoning I saw at least once was that it shows you can handle debt on the card, I've seen people say paying it all off helps, and I've seen that neither makes a difference as long as you make payments on time. At the end of the month, is the only difference between a balance and no balance just whether you pay interest or not and no real effect to credit scores?
I'd also noticed that keeping the use of the card below 30% of the credit limit can also help. The reason this is noteworthy is that my parents and I had planned to use my card to pay for school, and then they would pay it off. Is it more detrimental to do this than it is to not use the card for this? Card is a $2,500 credit limit card, school per semester is around $2,000-2,200 I believe.
Finally, is there any difference in paying off the card right away or waiting for the statement to come in? I wouldn't think so, but I've found that sometimes things work really weird.
KurnDerak on
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The report will show your credit limit, the balance, and a payment history (just paid y/n, it doesn't track payment amounts). The lower the balance, the better. The only reason you wouldn't just not use the card is that some companies will report it as inactive. So a card that has a bunch of months of inactive will mostly stop counting. Ideally you'd use it a little bit each month and pay it off all the way. That way it shows up as an active card with a low balance.
Honestly, just wait until you get the statement and pay it all off then. Billing with credit cards can get needlessly complex depending on what system they're using. I've had to untangle some horrible messes in my day with people making partial payments throughout the month.
fuck up once and you break your thumb / if you're happy at all then you're god damn dumb
that's right we're on a fucked up cruise / God is dead but at least we have booze
bad things happen, no one knows why / the sun burns out and everyone dies
This is great if you want to avoid interest, however it doesn't really help build your credit rating. What you'll see lenders look for is the maximum amount of credit alloted to you by another lender, meaning if you have a credit card with a limit of $500 it's frowned upon, but one for $10,000 is seen as a benefit. They'll look at the number of months/years you've owned the card (the longer the better), the amount on the card as of the last statement (use of your Debt/Available Credit ration).
Credit card companies send information to the union based upon payment as well. If it's early you get a certain rating that month, if it's on time another, and late the worst possible. If you don't carry a balance, i.e. pay the card off every month, you're not considered taking a loan, and it doesn't show as "borrowing money", which is paramount to helping to build your credit ration. If you pay it off every month, it looks like you're not being loaned anything by a lender, which other companies will look at.
My advice after working for a credit card company is to charge your tuition on it, and pay it off within a few months if possible, if your interest rate is anywhere near reasonable. Set the card up for automatic payments, for the minimum amount, it'll be the best thing you ever did. One missed payment will result in at least a $30 fee, and can boost your interest rate to nearly 30%.
There is a lot of false information here. If you have a credit card, it's considered a revolving line of debt. Paying it off every month does a lot to help your credit rating.
Credit card companies love people who pay interest, but it's a myth that you need to carry a balance to improve your credit rating.
The advice to only pay the minimum amount is comically bad. That's the kind of advice a super-villain working at a credit card company would give.
He'd have debt powers. And threaten the hero with repeated 3am phonecalls.
EDIT: Sorry if that came off a bit too snarky, I honestly didn't intend it in that capacity. It's been a few years since I worked for the bank, things may have changed in that time.
Now, carrying a balance may lead to that particular company raising your credit limit (since they're eager for you to spend more and pay more in interest), but that is not the same as raising your credit rating.
Using a card responsibly and paying it off in full every month is the best way to build your credit. Carrying a balance and paying interst is the best way to give money to your credit card company.
Which can get the person/company involved with a hefty fine paid to the person being called.
Like, $1000 per call. Also a good way to eliminate debt. I think the time limits are 8am-9pm in the person's time zone for collection calls. For instance a person in California can't call someone in NY just because it's 9pm in California and midnight in NY.
NOTE: This only works if you can control your own spending while using a card for everything.
Thanks D&D&H&A!
fuck up once and you break your thumb / if you're happy at all then you're god damn dumb
that's right we're on a fucked up cruise / God is dead but at least we have booze
bad things happen, no one knows why / the sun burns out and everyone dies
Auto pay is at the top of my list for things to do, just need to figure out which day to set it up for so that I make sure to have enough in checking to do that.
Interest on the card is 8.99% APR, APR ceiling is 18%. It's low enough that I'm not worried about keeping a low balance as long as it doesn't affect my credit score. I know the problem with that lies in making sure the balance doesn't get too high.