Question regarding timing of payments to maximize credit score

[ncs22]

Hi. I just received my first credit card, which is secured since I'm trying to build credit. My goal is to have an excellent credit score. Now, I have already used the card to purchase some items. I have a question about what amount I should pay, and when, to maximize my credit score. The first statement closing date was 6/13, and the "statement balance" was (I'm making up numbers here) $100. Then, on June 14 and June 20, I made some additional purchases totaling $50, pushing my "current account balance" up to $150. The due date for the first statement balance (the $100) is July 8. If I want to pay right now, I have the option to pay the minimum amount (which I am not going to do), the statement balance ($100), or the current account balance ($150). Is it better practice (if I decide to pay right now) to pay off the statement balance or the current account balance, in order to build a healthy credit score?

 

And, in general, at what point(s) during the cycle is it good to make payment(s), and is it better to focus on paying down the statement balance or the current account balance for any given payment?

 

Thanks...

[CB Owners]

Welcome to CreditBoards! We hope that you find what you're looking for here.

 

Some helpful tips:

 

• Your post may not get a reply right away. Don't be discouraged, this is a very busy board. If it falls off of the first page, feel free
  to reply to your post yourself, with the word *bump* in the text. This will *bump* your post back up to the top of the board.
  
• If you haven't yet, take a peek at out Newbies Section.
  Everything that you need to know is in that forum, for the most part! It's a lot of reading, we know, but this credit stuff can have a steep learning curve. In no time, you'll be posting like the pros!
  
• If you find that someone is discourteous to you, use the REPORT button at the bottom of every post - that will ensure that a moderator or admin looks at the post and decides if it is against the TOS.
  
• Off -topic posts should go in the General Forum.
  

 

Again, welcome to the CreditBoards family!

 

CB Admin: LKH, Pam, radi8, breeze

CB Mods: CargoJon, Chris in OK, cotterpin, CramItCCCAs, Fallon, MarvBear, CtSoxFan, pryan67, psp, Stryker, TrevorHere

Forum Leads: brazen, Brian B The Loan Professor, cedski, DallasLoanGuy, hoapres, ICANHASMUNY?, Lighthouse84, Linx04, TeeSharice

[selfmadetool]

Hi. I just received my first credit card, which is secured since I'm trying to build credit. My goal is to have an excellent credit score. Now, I have already used the card to purchase some items. I have a question about what amount I should pay, and when, to maximize my credit score. The first statement closing date was 6/13, and the "statement balance" was (I'm making up numbers here) $100. Then, on June 14 and June 20, I made some additional purchases totaling $50, pushing my "current account balance" up to $150. The due date for the first statement balance (the $100) is July 8. If I want to pay right now, I have the option to pay the minimum amount (which I am not going to do), the statement balance ($100), or the current account balance ($150). Is it better practice (if I decide to pay right now) to pay off the statement balance or the current account balance, in order to build a healthy credit score?

 

And, in general, at what point(s) during the cycle is it good to make payment(s), and is it better to focus on paying down the statement balance or the current account balance for any given payment?

 

Thanks...

Great questions, cs22. The very first thing you want to do is find out when the creditor reports to the credit agencies. It's only your first statement, so you may have to give this time. To answer your question, I would pay $100 to avoid any interest. In the future, I would pay the balance shortly before the creditor reports to the CRAs. I would not make multiple payments per month. I'm not sure about the other CRAs, but with Experian, your high credit limit is literally the highest amount of debt you ever owed the creditor at one time. The reason I point this out is if you charge $1,000 a week for three weeks in a cycle, but you make three payments of $1,000 shortly after each charge, then the high limit on Experian will only reflect $1,000 instead of $3,000. For a manual review, you want other creditors to see that you're used to dealing with and paying off high limits. Don't confuse this concept with paying interest. You would still pay the balance in full before it reports, but let the balances build before then.

[Tyra]

If that card is the only thing on your credit report, I would pay it down to $5 before the statement cuts. So when it reports, it reports with a statement balance of $5. That will likely give you a higher score than if it reported with zero. It varies a bit, but for most people you will get the highest score if you let it report between 1% and 3% on the statement date.

 

Utilization is a day by day thing. A snapshot of the current moment in time. If you want to have fun, play with the card reporting 1%, 10%, 30%, 50%, 90%, and 100% of the limit. You can play on a FICO Score estimator to get a feel for it:

http://www.bankrate.com/calculators/credit-score-fico-calculator.aspx

 

As far as what the credit card company will be impressed by, use the card a lot. That's what they want. You never need to carry a balance. Just use it and pay it down before the statement cuts each month.

[wanabe]

Hi. I just received my first credit card, which is secured since I'm trying to build credit. My goal is to have an excellent credit score. Now, I have already used the card to purchase some items. I have a question about what amount I should pay, and when, to maximize my credit score. The first statement closing date was 6/13, and the "statement balance" was (I'm making up numbers here) $100. Then, on June 14 and June 20, I made some additional purchases totaling $50, pushing my "current account balance" up to $150. The due date for the first statement balance (the $100) is July 8. If I want to pay right now, I have the option to pay the minimum amount (which I am not going to do), the statement balance ($100), or the current account balance ($150). Is it better practice (if I decide to pay right now) to pay off the statement balance or the current account balance, in order to build a healthy credit score?

 

And, in general, at what point(s) during the cycle is it good to make payment(s), and is it better to focus on paying down the statement balance or the current account balance for any given payment?

 

Thanks...

Great questions, cs22. The very first thing you want to do is find out when the creditor reports to the credit agencies. It's only your first statement, so you may have to give this time. To answer your question, I would pay $100 to avoid any interest. In the future, I would pay the balance shortly before the creditor reports to the CRAs. I would not make multiple payments per month. I'm not sure about the other CRAs, but with Experian, your high credit limit is literally the highest amount of debt you ever owed the creditor at one time. The reason I point this out is if you charge $1,000 a week for three weeks in a cycle, but you make three payments of $1,000 shortly after each charge, then the high limit on Experian will only reflect $1,000 instead of $3,000. For a manual review, you want other creditors to see that you're used to dealing with and paying off high limits. Don't confuse this concept with paying interest. You would still pay the balance in full before it reports, but let the balances build before then.

 

 

Find out what your creditor report to the CRA, statement balance or

end of the month balance. It doesn't really matter when they actually

report to the CRA. Pay all but balance you want to report before statement

date (if they report statement balance) or before the last day of the month

(if they report end of month balance). If you charge 3,000 and pay 1,000

at a time before statement cut the 3,000 will still show as high balance for

that statement period.

[Crashem]

More than likely the card reports the statement balance. Assuming this, you need to pay down whatever you want and have payment hit before statement date to get it to report as such.

[Agent 2207]

Since this is your first credit card, I would recommend that you pay the Statement Balance

in full each month.

 

Do not be too concern about your FICO Score at this time.

 

Creditors look at how you pay your balances.

[selfmadetool]

Find out what your creditor report to the CRA, statement balance or

end of the month balance. It doesn't really matter when they actually

report to the CRA.

Yes, this is correct.

 

If you charge 3,000 and pay 1,000

at a time before statement cut the 3,000 will still show as high balance for

that statement period.

This isn't what I said, but my apologies for not being clear. I've attached a timeline to illustrate what I said.

 

 

[wanabe]

Find out what your creditor report to the CRA, statement balance or

end of the month balance. It doesn't really matter when they actually

report to the CRA.

Yes, this is correct.

 

If you charge 3,000 and pay 1,000

at a time before statement cut the 3,000 will still show as high balance for

that statement period.

This isn't what I said, but my apologies for not being clear. I've attached a timeline to illustrate what I said.

 

 

 

That being said and showed it still will report the total amount used

for that statement period which will be 3,000 and the total amount

actually paid 3,000. If that was your highest balance the 3,000 will

show as highest balance.

[selfmadetool]

That being said and showed it still will report the total amount used

for that statement period which will be 3,000 and the total amount

actually paid 3,000. If that was your highest balance the 3,000 will

show as highest balance.

In my example, Experian will only reflect your high balance as $1,000 because that's the most you ever owed at one time, even though you charged $3,000 for the statement period.

 

If you insist what you're saying is accurate, please explain how my most recent update shows a high balance of $291, but a recent payment of $353.

 

 

 

As shown below, it's because I made two payments during the period.

 

[wanabe]

That being said and showed it still will report the total amount used

for that statement period which will be 3,000 and the total amount

actually paid 3,000. If that was your highest balance the 3,000 will

show as highest balance.

In my example, Experian will only reflect your high balance as $1,000 because that's the most you ever owed at one time, even though you charged $3,000 for the statement period.

 

If you insist what you're saying is accurate, please explain how my most recent update shows a high balance of $291, but a recent payment of $353.

 

 

 

As shown below, it's because I made two payments during the period.

 

 

On EQ mine shows total actual payment for the statement cycle regardless

if I made multiple payments and the high balance will be my highest balance

ever which may not be that statement cycle high balance. TU don't show actual

payment but date paid and the same high balance ever for each card. I will have to take a look at how my EX report when I get back.

[ncs22]

Hi everyone...thanks very much for all the responses so far. Since I'm new to credit, I just want to make sure I understand certain things correctly and have some additional questions...

 

1. I understand that I should contact the lender and determine when they report to the CRAs. I need to make a one-time payment just prior to that point in the cycle, but this payment should NOT result in a balance of $0 being reported to the bureaus. It should result in a balance of some small percentage of my credit limit being reported (like 1 to 3 percent). So if my credit limit is $1000, I should make sure that a balance of no more than 3% x $1000, or no more than $30, is reported to the bureaus. Is this correct?

 

2. Just to return to my original question to clarify...If I pay now, I should just pay the statement balance of $100, which would result in a current account balance of $50?

 

3. Hypothetically, let's say that it's the statement balance that is reported to the bureaus. Let's also say I have a credit limit of $1000. Suppose that a particular cycle starts on September 1 and ends on September 30, and that I had no balance due whatsoever at the start of this cycle (maybe think of this as the first cycle ever for me). Now, let's say that I make purchases totaling $100 between September 1st and September, say, 25th. Since I want no more than 3% of my credit limit (so, no more than $30) to appear as a statement balance on September 30th, I decide to make a $70 payment on September 25th. Then I make no additional purchases between the 25th and the 30th. So on the 30th, when I get my statement, it will show a statement balance of $30, which is what I wanted and which is what will report to the bureaus. Then, let's say that the due date for this statement balance of $30 is October 25th. I would simply make this payment sometime between September 30 and October 25th. Meanwhile, I would treat the October statement period as I did the September statement period. That is to say, I would use the card from October 1 through October, say, 25th......I would pay just enough on October 25th to leave me with a statement balance of no more than 3% of my credit limit (so, no more than $30) on October 30th.....I would not make additional purchases between October 25th and the 30th....I would pay off the October 30th statement balance by its due date sometime in November. So in this analysis, I'm making just one payment in September (on September 25th for $70)...I'm making TWO payments in October (the first to cover the September statement balance of $30 and the second on October 25th to leave me with an October 30 statement balance of no more than $30). Likewise, I'm making two payments in November and every subsequent month. Is all of this correct?

 

4. I've read in many places that a good rule is that you should not charge more than about 10% to 40% of your credit limit in a cycle. So, would that mean that in the above example I would not charge more than $100 to $400 in the month of September (where the month of September is a statement period)?

 

Thanks...

[ncs22]

BUMP

[selfmadetool]

1. I understand that I should contact the lender and determine when they report to the CRAs. I need to make a one-time payment just prior to that point in the cycle, but this payment should NOT result in a balance of $0 being reported to the bureaus. It should result in a balance of some small percentage of my credit limit being reported (like 1 to 3 percent). So if my credit limit is $1000, I should make sure that a balance of no more than 3% x $1000, or no more than $30, is reported to the bureaus. Is this correct?

As wanabe stated, find out whether the statement balance or end of the month balance is reported. When they report is irrelevant. That was my error.

 

2. Just to return to my original question to clarify...If I pay now, I should just pay the statement balance of $100, which would result in a current account balance of $50?

Yes, pay at least the statement balance of $100 to avoid being charged interest.

 

3. Hypothetically, let's say that it's the statement balance that is reported to the bureaus. Let's also say I have a credit limit of $1000. Suppose that a particular cycle starts on September 1 and ends on September 30, and that I had no balance due whatsoever at the start of this cycle (maybe think of this as the first cycle ever for me). Now, let's say that I make purchases totaling $100 between September 1st and September, say, 25th. Since I want no more than 3% of my credit limit (so, no more than $30) to appear as a statement balance on September 30th, I decide to make a $70 payment on September 25th. Then I make no additional purchases between the 25th and the 30th. So on the 30th, when I get my statement, it will show a statement balance of $30, which is what I wanted and which is what will report to the bureaus. Then, let's say that the due date for this statement balance of $30 is October 25th. I would simply make this payment sometime between September 30 and October 25th. Meanwhile, I would treat the October statement period as I did the September statement period. That is to say, I would use the card from October 1 through October, say, 25th......I would pay just enough on October 25th to leave me with a statement balance of no more than 3% of my credit limit (so, no more than $30) on October 30th.....I would not make additional purchases between October 25th and the 30th....I would pay off the October 30th statement balance by its due date sometime in November. So in this analysis, I'm making just one payment in September (on September 25th for $70)...I'm making TWO payments in October (the first to cover the September statement balance of $30 and the second on October 25th to leave me with an October 30 statement balance of no more than $30). Likewise, I'm making two payments in November and every subsequent month. Is all of this correct?

If you did as you just stated, you would be fine. I usually don't make two payments, but if it helps you keep on top of everything, then full speed ahead. Some people pay the statement balance immediately at the start of the new cycle so they don't forget. You can also do the auto pay thing, but that's a little too advanced for my blood.

 

4. I've read in many places that a good rule is that you should not charge more than about 10% to 40% of your credit limit in a cycle. So, would that mean that in the above example I would not charge more than $100 to $400 in the month of September (where the month of September is a statement period)?

As long as you're able to pay it off, you can charge 100% of your credit limit in a cycle if you'd like. A lender may even give you an increase if you continually charge a large percentage of your limit. The main concerns are how much you let report and your ability to pay it off.

[ncs22]

Thanks for the clarifications I just had a couple more concerns:

 

1. Is it true that (for purposes of maximizing credit score) it's better to let some small percentage of the credit limit report as a balance to the CRAs, as opposed to a balance of $0?

 

2. Why does it say in several places that it can be bad for the credit score to charge too high a percentage of the credit limit during a cycle?

 

Thanks..

[hegemony]

Thanks for the clarifications I just had a couple more concerns:

 

1. Is it true that (for purposes of maximizing credit score) it's better to let some small percentage of the credit limit report as a balance to the CRAs, as opposed to a balance of $0?

 

2. Why does it say in several places that it can be bad for the credit score to charge too high a percentage of the credit limit during a cycle?

 

Thanks..

 

1) it depends on what scorecard you fall into. when I used to experiment more my scores were always higher when I was able to get ZERO to report, but ample experience of others here also suggests scores can be maximized with a small % reporting. But this does NOT mean you should not pay in full each month. Even when you PIF, your activity reports.

 

2) if you have a high percentage used and that % reports it can be devastating to your scores. If you pay before the reporting date, however, it should not affect scores.

[Tyra]

Thanks for the clarifications I just had a couple more concerns:

 

1. Is it true that (for purposes of maximizing credit score) it's better to let some small percentage of the credit limit report as a balance to the CRAs, as opposed to a balance of $0?

Usually, yes, experiment with it yourself. There are something like 14 scorecards which I guess means like 14 different algorithms that could be used to calculate your FICO score that you buy from myfico.com. I used to be on one that gave me the best score when I had zero, now I am on one that drops my score by 10 points or so if I let zero report. You have to experiment if you are going for the ultimate high score that you can get right now. Or just don't worry about it and let either 0 or a little bit more than zero report.

 

2. Why does it say in several places that it can be bad for the credit score to charge too high a percentage of the credit limit during a cycle?

My guess is what you read referred to charge it and let it report, not charge it and pay it before statement cuts. As long as you pay before statement cuts, charging a lot will not adversely affect you.

Edited June 24, 2012 by Tyra

[ncs22]

Thanks So, just to clarify, it's okay to charge as much of the credit limit I'd like to, as long as I pay by the date that my balance is reported?

 

Also, are automatic payments okay (speaking in terms of developing a good credit score)? My plan allows me to pay the statement balance automatically on each due date, or to pay the minimum amount on the due date or to pay a fixed amount on the due date. Of these, I'd probably opt to pay the statement balance on each due date...would that be safe for my credit score?

[ncs22]

BUMP

[BobWang]

No simple answers, since some cards will report randomly.

 

Also, relying on AutoPay is risky.

 

I manually pay my Auto PIF accounts.

 

Belt & suspenders approach:

 

http://creditboards....howtopic=471527

[Gaby10]

That being said and showed it still will report the total amount used

for that statement period which will be 3,000 and the total amount

actually paid 3,000. If that was your highest balance the 3,000 will

show as highest balance.

In my example, Experian will only reflect your high balance as $1,000 because that's the most you ever owed at one time, even though you charged $3,000 for the statement period.

 

If you insist what you're saying is accurate, please explain how my most recent update shows a high balance of $291, but a recent payment of $353.

 

 

 

As shown below, it's because I made two payments during the period.

 

 

On EQ mine shows total actual payment for the statement cycle regardless

if I made multiple payments and the high balance will be my highest balance

ever which may not be that statement cycle high balance. TU don't show actual

payment but date paid and the same high balance ever for each card. I will have to take a look at how my EX report when I get back.

 

On my TU (and TU only) I have a $10,000 credit card and $2,000 LOC, both from the same CU. The credit card shows a High Balance of $10,000 (most I've ever spent in one statement period is around $50); the LOC, which has never been used, shows a High Balance of $2,000. BULLPUCKY.

 

However, although I have always PIF and never actually carried a balance at all, both EQ and EX show a high balance of $50-ish, which is indeed the most I've ever spent in a month.

 

I know.