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rpg37
LSU Fan
Walls, MS
Member since Sep 2008
16510 posts

Question on credit score and credit card balances.


I just paid off all my credit cards today. However, I had some older friends who said to maximize your credit score, you want to keep a small balance on there just to show them they are making a little money off of you while at the same time showing you can pay it off. So, which is better, a $0 balance or a small balance, which they suggested around $50-$100?






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iAmBatman
New Orleans Saints Fan
The Batcave
Member since Mar 2011
3692 posts

re: Question on credit score and credit card balances.


quote:

I just paid off all my credit cards today.


congrats

quote:

to maximize your credit score, you want to keep a small balance on there just to show them they are making a little money off of you while at the same time showing you can pay it off.


Wrong. No revolving balance is best for you. Charge a little bit every month (like gas or dinner one night) and pay it off when the bill comes in.

Part of your credit score is % of credit used so keeping a balance, however small, will decrease that % and thus, decrease your credit score.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
28617 posts

re: Question on credit score and credit card balances.


Unless you get above a certain percentage of your balance it doesn't impact your score. I think that percentage is usually 10-20% but I don't know for certain.

That said, the card issuer might like to see some activity once in a while but that has nothing to do with your score.






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rpg37
LSU Fan
Walls, MS
Member since Sep 2008
16510 posts

re: Question on credit score and credit card balances.


quote:

congrats


Thanks!

As for the revolving credit, I use the card constantly. I am getting quite accustomed to using the card regularly for all purchases and then paying it off immediately.






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iAmBatman
New Orleans Saints Fan
The Batcave
Member since Mar 2011
3692 posts

re: Question on credit score and credit card balances.


quote:

As for the revolving credit, I use the card constantly. I am getting quite accustomed to using the card regularly for all purchases and then paying it off immediately.


That's all you need to do then.

A revolving balance means having some portion of the balance unpaid at the end of the month, and thus having interest charged.






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rpg37
LSU Fan
Walls, MS
Member since Sep 2008
16510 posts

re: Question on credit score and credit card balances.


quote:

A revolving balance means having some portion of the balance unpaid at the end of the month, and thus having interest charged.


But, like I said, I paid it to $0, thus eliminating interest. Is that not appropriate?






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iAmBatman
New Orleans Saints Fan
The Batcave
Member since Mar 2011
3692 posts

re: Question on credit score and credit card balances.


quote:

But, like I said, I paid it to $0, thus eliminating interest. Is that not appropriate?


That is the best way to use a credit card.

Feel free to use it during the month as much as you want, just make sure to pay the balance whenever it is due.






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Will Cover
Gonzaga Fan
Nashville, TN
Member since Mar 2007
23893 posts

re: Question on credit score and credit card balances.


quote:

I just paid off all my credit cards today




quote:

I had some older friends who said to maximize your credit score, you want to keep a small balance on there just to show them they are making a little money off of you while at the same time showing you can pay it off


MYTH: Paying my credit card charges early helps my credit score.

FACT: There’s nothing on your credit report that shows when a bill is paid, only whether it was paid on time.

A good credit score is the result … not the goal. It’s not how much you make, it how much you keep. Don't give any of your income away to pay interest charges to a credit card company for the sake of "improving" your credit score.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
28617 posts

re: Question on credit score and credit card balances.


quote:

I paid it to $0, thus eliminating interest. Is that not appropriate?


It's very appropriate, but your report will show whatever balance your last statement had.

So if you spent $500 this month, you get a statement saying you have a minimum payment of whatever but you can pay the balance in full for $500 and avoid interest. Being a wise fellow you do this, but your credit report will show that you owed $500 at the end of that month.

This is okay though.






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ds1tiger
LSU Fan
Closer than you think
Member since Apr 2006
228 posts

re: Question on credit score and credit card balances.


The balance reported to the credit bureau is your balance on the last day of your billing cycle. This date is not necessarily the last day of the month. My card's billing cycle ends on the 7th of each month. My due date is on the 4th of each month (where I pay the previous statement's balance). If you want to manipulate the reported balance each month, just have it where you want it when the billing cycle ends. As far as credit score is concerned, you need to keep your balance under 30% of your limit to get the maximum benefit.





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JonTheTigerFan
LSU Fan
Central, LA
Member since Nov 2003
4579 posts

re: Question on credit score and credit card balances.


quote:

I just paid off all my credit cards today. However, I had some older friends who said to maximize your credit score, you want to keep a small balance on there just to show them they are making a little money off of you while at the same time showing you can pay it off. So, which is better, a $0 balance or a small balance, which they suggested around $50-$100?


I'm in the process of building a house and wanted to maximize my FICO score. I researched and found that (though everyone's situation may be different) the FICO scoring models supposedly are designed to give you the highest score when you keep a zero balance on all open credit cards and between 1 and 9% balance on ONE card. I've tried keeping a small balance on all cards, zero balance on all cards, over 10% on one card, etc. over the past several months. I found that having a zero balance on all my cards except one and a small (less than 10% balance) on that one resulted in the highest FICO score. As soon as I close on this house, I'm paying that one off and won't keep a balance on any cards. There's no reason to keep a balance reporting unless you are trying to maximize your FICO score for a purchase.






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lsu tigerdog
LSU Fan
Baton Rouge
Member since Nov 2007
114 posts

re: Question on credit score and credit card balances.


keep it at a 10% balance and you'll be safe with your scores,but be careful with the credit companys, if you decide not to use your credit card and their is no activity on the card and lets say you have a $1000 high limit, the credit company can cut your limit to whatever dollar amt they want,(read the tiny print on their disclosures),this has happened to me,





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VABuckeye
Ohio State Fan
Oak Hill, VA
Member since Dec 2007
9903 posts

re: Question on credit score and credit card balances.


quote:

A good credit score is the result … not the goal. It’s not how much you make, it how much you keep. Don't give any of your income away to pay interest charges to a credit card company for the sake of "improving" your credit score.


Great points here. It's not a dick measuring contest. If you have a 770 or 790 or 815 they're all great scores and you'll get the best rates and deals available.






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