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Modern
Houston Astros Fan
État de Louisiane
Member since May 2011
14537 posts

Paying off a credit card too soon?
I have a jewelry store credit card. Been having it for about 5 years. Everytime I purchase something on it, I pay off the balance within a year.


My balance was 0 until this past Xmas (bought wife a gift, and a new watch for me) and been paying on it for the past 3 months.

Q: I can afford now to pay the whole balance off right now. But is it wise to go ahead and pay it off now or let it sit and pay on it for a few months and then pay it off.....looking for the best results credit score wise


Lsut81
Chicago Cubs Fan
Member since Jun 2005
69374 posts
 Online 

re: Paying off a credit card too soon?
quote:

Q: I can afford now to pay the whole balance off right now. But is it wise to go ahead and pay it off now or let it sit and pay on it for a few months and then pay it off.....looking for the best results credit score wise


I could be 100% wrong here, but I don't believe it is the amount of time you have a balance, but the amount of time you have the card open.... So if they won't close the card if you pay it off, I don't think it matters.

Having said that, if you are getting 0% on the balance, make the minimum payment and invest the payoff you were going to use. No reason not to make money off of them.


Modern
Houston Astros Fan
État de Louisiane
Member since May 2011
14537 posts

re: Paying off a credit card too soon?
Right now I'm on 0% finance for 6 months.


reb13
Ole Miss Fan
Dallas, TX
Member since May 2010
10780 posts

re: Paying off a credit card too soon?
Pay it off


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ItNeverRains
LSU Fan
Franklin, TN
Member since Oct 2007
15418 posts

re: Paying off a credit card too soon?
It's credit to debt ratio. More open credit you have with little balance as possible, but actively using the credit is the best approach.

If you have any other balances charging interest I'd clean those up first.


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Dead Mike
LSU Fan
Cell Block 4
Member since Mar 2010
2973 posts

re: Paying off a credit card too soon?
It is a myth that carrying a balance and paying interest will benefit your credit score. All that will be reported to the credit bureau is your statement balance in this respect, meaning that you can pay everything off before the due date and still show reasonable credit utilization.


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30
Will Cover
Southern Cal Fan
Sacramento, CA
Member since Mar 2007
35019 posts

re: Paying off a credit card too soon?
quote:

No reason not to make money off of them.


You'd be surprised at how much of a better deal I have been able to get at my local jewelry store because I pay in cash. I'm talking thousands.


Lsut81
Chicago Cubs Fan
Member since Jun 2005
69374 posts
 Online 

re: Paying off a credit card too soon?
quote:

You'd be surprised at how much of a better deal I have been able to get at my local jewelry store because I pay in cash. I'm talking thousands


Yeah, no doubt... But my point is, if he's already got 0% financing with a balance on there. Why would he rush to pay if off? Pay the minimum and put the rest into an account where he can make money or earn interest.

Of course, if its only a few hundred, then just pay that shite off and be done with it.


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Rush2112
LSU Fan
Asheville
Member since Mar 2008
842 posts

re: Paying off a credit card too soon?
My personal experience in a similar situation.. My credit score was sitting still at slightly above average for a couple of years. I got an AMEX rewards card that was 0% for a year, so I put everything on it and payed only the $35 monthly min. payment. My credit score increased dramatically throughout that year, and there were no other big account changes. Once the year passed and I paid the lump sum, my credit score started decreasing at about 2-3 points per month, again with no other account changes.

I don't really know how it works. All I know is that it's retarded.


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50
Ace Midnight
LSU Fan
Between sanity and madness
Member since Dec 2006
70766 posts

re: Paying off a credit card too soon?
What you want here is to optimize your utilization. I would just carry a balance of $20 over from month to month to build credit. That will minimize your finance charges. If your average daily balance is $20, that's less than $0.25, even at 14% - so you would probably trip a minimum finance charge of 50 cents or a dollar (whatever) - and that would be your cost of showing some utilization.

In all cases, keep your utilization below 50%, otherwise, it becomes a negative drag on your credit score. I'm just figuring out these things in my late 40s, so good luck.

The factors that influence your score are average age of credit lines (which is why you shouldn't close your oldest line - ever - without a good reason), utilization (10% to 20% is probably your sweet spot, here - meaning the balance you carry from month to month as a percentage of your card limit) for revolving credit, payment history, derogatory marks and hard credit inquiries (and these seem to hit at about 2 points a pop, for me.)

So, what a CC does is help you with payment history, credit history AND utilization - which is why credit cards are so influential in good/bad credit scores.

A mortgage default is, basically, 2 hits - the payment history and a derogatory mark. If it is one of your longer credit histories, it can hit you there, too.

A credit card, particularly one you've held for awhile, has the potential to hit every mark except hard credit history.



kennypowers816
LSU Fan
New Orleans
Member since Jan 2010
2431 posts

re: Paying off a credit card too soon?
Credit score wise, let it hit the statement (make a statement balance) and pay it fully by the due date to avoid the interest. If you pay it off before the statement, it will never be reported.

Keep your utilization (amount on your statement balance divided by your total credit) less than 20%.


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Dead Mike
LSU Fan
Cell Block 4
Member since Mar 2010
2973 posts

re: Paying off a credit card too soon?
Again, carrying a balance is not reported to the credit bureau. Your statement balance is, so once that statement balance is available (and between 1-30% of your limit), pay it off and don't pay the interest.


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Teddy Ruxpin
LSU Fan
TX
Member since Oct 2006
33702 posts
 Online 

re: Paying off a credit card too soon?
quote:

What you want here is to optimize your utilization. I would just carry a balance of $20 over from month to month to build credit. That will minimize your finance charges. If your average daily balance is $20, that's less than $0.25, even at 14% - so you would probably trip a minimum finance charge of 50 cents or a dollar (whatever) - and that would be your cost of showing some utilization.



Not trying to be mean, but this is 100% incorrect.

There is no cost to show utilization. Utilization is the reported balance of what you owe when your statement closes. Say $100 reports on your closing statement. If I pay $100 and charge another $100 before the next statement close, I will pay no interest, and my balance will report the new $100 on the next statement, keeping my utilization the same. Again, there is no "cost to show utilization."
This post was edited on 2/26 at 12:55 pm


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10
Will Cover
Southern Cal Fan
Sacramento, CA
Member since Mar 2007
35019 posts

re: Paying off a credit card too soon?
quote:

looking for the best results credit score wise


A good credit score is the RESULT ... not the GOAL.

A FICO score or any credit score for that matter are only important if you want to get into debt. What’s the opposite of wealth? Debt, of course. So if you want to be wealthy, getting into debt is not going to get you there. It’s not how much you make, it how much you keep. And while it may be true to some extent to not close your unused credit cards, providing you want to stay in debt, it really doesn’t matter that much for those that are or want to be wealthy.

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.
This post was edited on 2/26 at 1:27 pm


LSUAfro
LSU Fan
Baton Rouge
Member since Aug 2005
12775 posts

re: Paying off a credit card too soon?
quote:

Will Cover

Mr. Ramsey would be proud of you.
This post was edited on 2/26 at 1:33 pm


Will Cover
Southern Cal Fan
Sacramento, CA
Member since Mar 2007
35019 posts

re: Paying off a credit card too soon?
quote:

Mr. Ramsey would be proud of you.


While I don't follow his advice word for word, he indirectly helped my wife and me look at the way we were doing things. And we were doing them incorrectly.

Ten years later, I wouldn't trade the life experiences that we went through for where we are today.

Having plenty of money left over at the end of the month, no debt (except for house) and maximizing out our 401(k) contributions - it's a great place to be in.
This post was edited on 2/26 at 1:36 pm


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Volvagia
LSU Fan
Fort Worth
Member since Mar 2006
46825 posts

re: Paying off a credit card too soon?
Pay off your balance.


If you want a bump credit score wise, keep a total of 10% balance on all credit cards.


Only do this when you are looking to buy a house or a car.


There is NO advantage to doing this over time.


iAmBatman
USA Fan
The Batcave
Member since Mar 2011
9189 posts

re: Paying off a credit card too soon?
quote:

If you want a bump credit score wise, keep a total of 10% balance on all credit cards.






no


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Teddy Ruxpin
LSU Fan
TX
Member since Oct 2006
33702 posts
 Online 

re: Paying off a credit card too soon?
I was fine with the totality of your post except:

quote:

And while it may be true to some extent to not close your unused credit cards, providing you want to stay in debt,


Having an unused credit card to increase credit card age (and therefore score) does not equal "staying in debt."

This thread has enough misinformation already.
This post was edited on 2/26 at 2:33 pm


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iAmBatman
USA Fan
The Batcave
Member since Mar 2011
9189 posts

re: Paying off a credit card too soon?


Payment history is 35%

Lenders are most concerned about whether or not you pay your bills. The best indictor of this is how you’ve paid your bills in the past. Late payments, collections, and bankruptcies all affect the payment history of your credit score. More recent delinquencies hurt your credit score more than those in the past.

Debt level is 30%

The amount of debt you have in comparison to your credit limits is known as credit utilization. The higher your credit utilization – the closer you are to your limits – the lower your credit score will be. Keep your credit card balances at about 30% of your credit limit or less.

Length of credit history 15%

Having a longer credit history is favorable because it gives more information about your spending habits. It’s good to leave open the accounts that you’ve had for a long time.

Inquiries are 10%

Each time you make an application for credit, an inquiry is added to your credit report. Too many applications for credit can mean that you are taking on a lot of debt or that you are in some kind of financial trouble. While inquiries can remain on your credit report for two years, your credit score calculation only considers those made within a year.

Mix of credit is 10%

Having different kinds of accounts is favorable because it shows that you have experience managing a mix of credit. This isn’t a significant factor in your credit score unless you don’t have much other information on which to base your score. Open new accounts as you need them, not to simply have what seems like a better mix of credit.



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