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Credit Card pay full balance vs pay a portion

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I am hearing people say that to best way to raise your credit is to use a credit card and just pay most of the balance and let a certain amount carry over, while some online reading says that you should always pay the account full... Can anyone debunk this myth?

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Always pay your balance in full if you can. All that letting a balance carry over will do is cost you money in interest charges. As long as you use the card, let the statement cut that shows a balance, and PIF by the due date, the card will report the positive activity and you will pay nothing in interest. This is the best thing you can do.

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Always pay your balance in full if you can. All that letting a balance carry over will do is cost you money in interest charges. As long as you use the card, let the statement cut that shows a balance, and PIF by the due date, the card will report the positive activity and you will pay nothing in interest. This is the best thing you can do.

 

+1

 

Carrying a balance that you could otherwise pay costs money and has no impact of FICO risk scores. Some speculate that it could impact a custom score where a bank is looking for people that carry a balance since that generates more bank income. It's very speculative though.

 

To maximize your FICO the general rule is to have all your cards except one report a zero balance and let the remaining one report a small balance (<5% of CL). This if usually done by prepaying the entire balance of the cards you want to zero out, not just the previous month's balance due, by the due date.

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If you have 3 or 4 or more cards then let one of them report a balance not more than $10, say $5 or $2. PIF the rest to $0.

 

The "small balance for CLI" logic perhaps works or worked sometimes, but in practice the above method is FTW.

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I think there is a distinction that may be causing you some confusion: statement date vs. due date. The statement date is just that...the date the statement is generated. Your due date is a few weeks later. However, most CC issuers report the total balance on the statement date and not just the balance due or the balance carried. Most people who always PIF and never incur interest charges won't show 0% utilization on their CR because it's the balance when the statement is cut that gets reported.

 

So, with that cleared up, what you may have heard is to let one card report a balance, not carry a balance. This is for FICO scoring purposes.

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ctb89 hit the nail on the head.

 

also, by PIF it is my hypothesis that it makes you more of a candidate for a CLI and other offers.

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What about if your statement is AFTER the due date?

 

For example, I have a due date on the 12th of every month. I always PIF....but my statement doesn't come until the 15th. So by the time the 15th comes, it reports a $0 balance I assume? Or does it still take account of my usage during the month before the 12th?

 

Someone please chime in. I am using credit cards strictly to build my credit score, but have always been confused about this.

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What about if your statement is AFTER the due date?

 

For example, I have a due date on the 12th of every month. I always PIF....but my statement doesn't come until the 15th. So by the time the 15th comes, it reports a $0 balance I assume? Or does it still take account of my usage during the month before the 12th?

 

Someone please chime in. I am using credit cards strictly to build my credit score, but have always been confused about this.

 

 

The payment you are making on the 12th is for the previous months statement. So on June 12th you are paying May's statement (the one generated on May 15th, which was for activity from April 16 to May 15). The statement that cuts on June 15th is for the activity from May 16-June 15. The only way you will not get a balance to report is if you paid the amount due on June 12 plus the amount of any charges from May 16-June 15.

 

Hope that clears it up.

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What about if your statement is AFTER the due date?

 

For example, I have a due date on the 12th of every month. I always PIF....but my statement doesn't come until the 15th. So by the time the 15th comes, it reports a $0 balance I assume? Or does it still take account of my usage during the month before the 12th?

 

Someone please chime in. I am using credit cards strictly to build my credit score, but have always been confused about this.

 

 

The payment you are making on the 12th is for the previous months statement. So on June 12th you are paying May's statement (the one generated on May 15th, which was for activity from April 16 to May 15). The statement that cuts on June 15th is for the activity from May 16-June 15. The only way you will not get a balance to report is if you paid the amount due on June 12 plus the amount of any charges from May 16-June 15.

 

Hope that clears it up.

 

Good explanation.

 

Doing that on all but one card and letting that one card report a small balance, by paying in full plus a portion of the recent charges post prior statement, such that the next posted balance is between 1% and 5% of the card's CL has typically resulted in the highest FICO score. At least in many individual reports.

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Do most people here PIF before the statement date every month consistently? I've been doing it on all my cards (except the ones where I still am in debt repayment mode) and am wondering if most of my cards always having $0 balance at reporting time raises any questions on a manual review.

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Do most people here PIF before the statement date every month consistently? I've been doing it on all my cards (except the ones where I still am in debt repayment mode) and am wondering if most of my cards always having $0 balance at reporting time raises any questions on a manual review.

 

This is an interesting question. Creditors report differently and there have been changes in what they report.

 

In my case all cards report balances and minimum payments due when statements post however WF also reports actual payments made. So, upon manual review they cannot tell if I made a 10k charge on the Citi card but paid it before the statement it would have shown up on cut. OTOH, if the charge was on WF they would show that a 10k payment was made. This is complicated by the fact that each bank knows your complete payment history for their cards but only for their cards.

 

In order not to appear to be a customer who uses almost no credit and doesn't even charge significant amounts I usually PIF the posted balance and let charges accrue and post normally. The exception to this is when I anticipate apping in which case I will prepay all but one card to zero out all the reporting balances. This maximizes the FICO risk score but leaves in place most of the evidence that I make good use of my CCs.

 

While at this point I believe this is optimal, I am a long way from certain and am interested in any and all stories people may have about their experiences.

 

 

EtoA:

FICO sells, in addition to the FICO risk score, a so called "capacity index" score that purports to estimate your capacity to absorb additional debt. Almost certainly this factors in the variance in posted balances to make an estimate of your spending and payment patterns. In the case of cards that report actual payments and not just balances this score likely uses that info.

Edited by cashnocredit

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Some buckets score a little higher at 0% utilization, while other buckets score a little higher at a small utilization.

 

This is well illustrated in the graph here: http://creditboards.com/forums/index.php?showtopic=3207

At least for the older TU model. It looks like they are non thin files with major baddies in one. It would be nice to see all ten buckets with a more recent FICO vintage.

 

The newer EQ FICO score seems to tip downwards at 0, like the bucket with baddies (pink), for my scores. Both when I had baddies and didn't.

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Point taken, sir. :)

 

What I was really getting at is that it may be different for everyone, so we should each experiment and find out.

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Some buckets score a little higher at 0% utilization, while other buckets score a little higher at a small utilization.

 

This is well illustrated in the graph here: http://creditboards....?showtopic=3207

 

I primarily use a Capital One Rewards Card for everything. I have a low limit on this card of $500 because my credit is bad. In order to maximize my cash-back, I make 4 - 5 payments per week on this card. So when I look at my credit reports, they usually show this card has a low balance of about $30. I am hoping this strategy:

 

1. Maximizes my FICO

2. Maximizes my cash back

3. Eventually gets me a higher limit with Cap One

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Point taken, sir. :)

 

What I was really getting at is that it may be different for everyone, so we should each experiment and find out.

 

Oh, I quite agree. The only thing I can speak to is my personal experimentation and some of the reports here and elsewhere. In particular we need input from anyone doing similar experiments. Thanks for the link too. At a minimum it suggests that there are likely cases where the methodology I'm using isn't optimum so it's definitely interesting stuff.

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All my credit cards, including my auto loan, reports the balance owed on the date they report to the CRA. For ezample, credit card 1 is due on May 10, statement is cut a week prior showing a balance of 350.00. I pay the 350.00 on May 10, it is reported to the CRA as zero balance on May 16, which is the date they normally report to the CRA.

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