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What Is The Best Way To Use My Line of Credit.


Yoshimura
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Hi, I wanted some help to know what is the best way to use my line of credit to increase my credit score. I have 3 Credit Cards and 1 Line of credit. I use my 3 credit card less than 10% each month and pay in full every time. Just got a line of credit with my bank of 5000$ and took 500$ right away. I didnt need the money I just wanted to make a payment history. My yearly interest rate is 11%. My question is what is the best way to increase my score with the Line of Credit. Do I borrow 500$ each month and pay it in full each time? Or do I keep that 500$ and repay 50$ a month? What is the best way to improve my credit and add a positive history with that line of credit.

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22 hours ago, Yoshimura said:

Hi, I wanted some help to know what is the best way to use my line of credit to increase my credit score. I have 3 Credit Cards and 1 Line of credit. I use my 3 credit card less than 10% each month and pay in full every time. Just got a line of credit with my bank of 5000$ and took 500$ right away. I didnt need the money I just wanted to make a payment history. My yearly interest rate is 11%. My question is what is the best way to increase my score with the Line of Credit. Do I borrow 500$ each month and pay it in full each time? Or do I keep that 500$ and repay 50$ a month? What is the best way to improve my credit and add a positive history with that line of credit.

With the thin file, it is even more critical that you permit one of the cards to report a small balance.  This does not require you to pay interest. 

 

It is not worth paying double-digit interest to gain a few points.  You don't want to be paying $50 or more in interest to drag out a $500 repayment across the better part of a year.

 

What are the current scores as obtained through a real service offering Fair Isaac scores?    

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Hi, thanks for your answer. I'm in Canada and it's only Equifax and Transunion. I have 799 Transunion and had 793 Equifax but as fallen to 780 with no new information explaining that 13 points drop. The only new information was the 500$ balance on my 5000$ Line of credit. I used my line of credit for the first time the 8 of november 2021 for 500$ and my first due date is the 5th of december 2021.

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51 minutes ago, centex said:

With the thin file, it is even more critical that you permit one of the cards to report a small balance.  This does not require you to pay interest. 

 

It is not worth paying double-digit interest to gain a few points.  You don't want to be paying $50 or more in interest to drag out a $500 repayment across the better part of a year.

 

What are the current scores as obtained through a real service offering Fair Isaac scores?    

Forgot to quote you on my answer but it will have to be approved by a admin first.

 

As of today I have 1.14$ in interest on that 500$. So, if I understood correctly the smart way will be to have that 500$ reported and pay right away. It will only cost me 1.14$ each months. I think it's affordable to make a payment history with a different sort of credit product. I only had credit cards  and doesnt have a mortgage or personal loan because I doesnt need it so I found it was important to show that I can handle different sort of credit and at 1.14$ a monrh I found it to be the less expensive way. Do you think I should use less? Like 250$ a month and pay it right after it is reported?

 

Thanks in advance for your time.

Edited by Yoshimura
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  • 2 weeks later...

Belated input, but what you're attempting to do with a credit line you DON'T WANT TO DO with a credit line.

 

For one thing, establishing an additional payment history with a credit line is unlikely to gain you much traction with FICO if you already have 3 revolving accounts AND use them actively (at least one charge each month).

 

Another issue is that an open line of credit is one of the most precious credit resources to have on tap (there are typically few, if any, restrictions on how you can tap the credit and use the proceeds).  You want to treat it as treasured and use it sagely.  Making use of it in an attempt to boost one's credit score with no other benefit derived, borders on frivolity. 

 

Finally, fine tuning a credit score isn't the best allocation of time resources ( ... and I'll suggest that any effort to boost a score of 740+ should be deemed as "fine tuning").  740 is the point at which 95%-99.9% of all credit opportunities are open to you, provided you qualify on other factors (income, etc.)  Anything in excess of that should simply be treated as "surplus", with little added value other than bragging rights.  (There's no trophy for finishing "the race" with an 850 FICO.)

 

I'm coming on a bit strong here, so please take this input with a larger than usual "grain of salt".  I'm simply stressing that you want to set your sights on a broader perspective where your credit is concerned.

 

The one piece of advice I have is that the key credit component that your profile may be missing is an open or paid installment loan.  If there's no such account on your report, you may wish perusing CB for advice on how to establish a low cost installment tradeline.  It may get you a 20+ pt bump.

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