raising your fico score...

[aries2k1]

ive heard conflicting reports. some say it's better to leave a balance because only cards with balances get reported to credit card bureaus. others say its better to pay off the whole amount. can anyone clear this up for me?

 

[dullard]

FALSE: "only cards with balances get reported to credit card bureaus."

TRUE: "its better to pay off the whole amount."

There has never, ever been any evidence to support any other conclusion. Remember, on any given day you almost always have a balance. This is true even if you pay off your CC bill in full each month. Why? Because, between the closing date of the CC bill and the time you pay that bill, you probably have made at least one CC charge. Thus, you might NEVER have a $0 balance even if you pay in full! So, you always have a balance and it always gets reported.

Leaving a balance only serves one purpose: to make you poorer and CC companies richer.

 

[GasX]

The only thing that REALLY matters is that you pay on time EVERY time.

 

[LegendKiller]

Originally posted by: Mwilding
The only thing that REALLY matters is that you pay on time EVERY time.

That isn't exactly true. There are several strikes that can go against you, such as continually revolving high balances without complete pay-off. Also, utilization rates matter quite a bit. If you have 10 cards you are paying on time and all 10 have utilization rates at 80%, then you will get dinged.

 

[TripleAAA]

My score is at 680 right now and after looking at my credit report recently, I noticed I still had some open accounts from a long time ago through Chevron (gas card) and a Sears card that I never used.

I called Chevron and Sears to close both accounts and have also paid off about $5000 in credit card/home equity debt. Other than my home loan of about $200k, I'm debt free.

The only thing is I wish I could see how much this affects my score by doing this. I know there are FICO score trackers, but the score is unlikely to go up immediatly. I'm gonna take advantage of the score tracker through myfico.com which offers a 30 day free trial, but I won't be signing up for it for at least a couple more weeks.

 

[imported_goku]

Fico score is worthless unless you like being in debt, period. If you don't take out loans and you pay off your credit card every month, you could have a fico score of 0 and you'd still be ok.

 

[halik]

Originally posted by: dullard
FALSE: "only cards with balances get reported to credit card bureaus."

TRUE: "its better to pay off the whole amount."

There has never, ever been any evidence to support any other conclusion. Remember, on any given day you almost always have a balance. This is true even if you pay off your CC bill in full each month. Why? Because, between the closing date of the CC bill and the time you pay that bill, you probably have made at least one CC charge. Thus, you might NEVER have a $0 balance even if you pay in full! So, you always have a balance and it always gets reported.

Leaving a balance only serves one purpose: to make you poorer and CC companies richer.

that about sums it up....

 

[LukFilm]

Yep. Always pay it off no matter what.

 

[TripleAAA]

Originally posted by: goku
Fico score is worthless unless you like being in debt, period. If you don't take out loans and you pay off your credit card every month, you could have a fico score of 0 and you'd still be ok.

Huh? I thought the point of a FICO score was in part to obtain better rates on loans and other stuff. Unless you have no need to ever finance anything and are super rich, a good FICO score is pretty darn important in the long run aint it?

 

[ebaycj]

Originally posted by: TripleAAA

Originally posted by: goku
Fico score is worthless unless you like being in debt, period. If you don't take out loans and you pay off your credit card every month, you could have a fico score of 0 and you'd still be ok.

Huh? I thought the point of a FICO score was in part to obtain better rates on loans and other stuff. Unless you have no need to ever finance anything and are super rich, a good FICO score is pretty darn important in the long run aint it?

I think that was what he was getting at, you should work to be super rich rather than worrying about your FICO score.

 

[dullard]

Originally posted by: goku
Fico score is worthless unless you like being in debt, period. If you don't take out loans and you pay off your credit card every month, you could have a fico score of 0 and you'd still be ok.

FALSE. Debt isn't the only reason to care about your credit score. Do you realize that your car insurance company looks at your FICO score? The price you get is significantly dependant on that score. Other companies do this too. Go ahead and pay double for many things. I'll enjoy my low cost services with my good credit score.

You are only looking at half of the whole picture. Heck, even if you only look at the debt half, you are arguing for no car loans, no mortgages, no starting new businesses with a loan, etc. What a limited life you want us to all have.

 

[TripleAAA]

Well in a perfect world, we'd all be super rich and never have to finance anything. But cmon...you know that isn't true for 99% of us out there.

 

[cubby1223]

Originally posted by: goku
Fico score is worthless unless you like being in debt, period. If you don't take out loans and you pay off your credit card every month, you could have a fico score of 0 and you'd still be ok.

Says the guy who's never considered buying a new car or a house.

 

[dullard]

Originally posted by: TripleAAA
Well in a perfect world, we'd all be super rich and never have to finance anything. But cmon...you know that isn't true for 99% of us out there.

And while it is true that you can be careless and become super rich, it is more likely that you become super rich by good financial transactions. Ignoring your credit score and paying more for loans/services isn't a good start to becoming super rich.

 

[DaWhim]

your fico score goes down when you utilitize "too much" credit line in 1 card.

 

[ryan256]

Don't mean to hijack the thread but this kinda goes along with the OP's question.
I've got about 6 credit cards all with a 0 balance. I use my chek card pretty much exclusively for purchases. My score is ~720. Would closing out some of these 0 balance accounts help raise my score?

 

[Tsaico]

Originally posted by: dullard

Originally posted by: goku
Fico score is worthless unless you like being in debt, period. If you don't take out loans and you pay off your credit card every month, you could have a fico score of 0 and you'd still be ok.

FALSE. Debt isn't the only reason to care about your credit score. Do you realize that your car insurance company looks at your FICO score? The price you get is significantly dependant on that score. Other companies do this too. Go ahead and pay double for many things. I'll enjoy my low cost services with my good credit score.

You are only looking at half of the whole picture. Heck, even if you only look at the debt half, you are arguing for no car loans, no mortgages, no starting new businesses with a loan, etc. What a limited life you want us to all have.

I agree, I also know, depending on the position, my company runs your credit also as part of background check. In some of the areas that deal with personal info or money transactions, a poor credit rating will get you bumped out of contention. I guess the reasoning is that if you have poor credit because of financial problems, you will be more likely to get yourself into trouble.

And as far as the origional question is concerned, paying off is better and having a bill close to your limit will get you dinged. The credit cards do report cards in good standing also, but leaving lots of unused accounts open leaves you up for good ID theft target or trouble. I think the best suggestion I heard is to use your card monthly, so it has activity and pay off the balance completely when the bill comes.

 

[TripleAAA]

Originally posted by: ryan256
Don't mean to hijack the thread but this kinda goes along with the OP's question.
I've got about 6 credit cards all with a 0 balance. I use my chek card pretty much exclusively for purchases. My score is ~720. Would closing out some of these 0 balance accounts help raise my score?

I'm in a similar situation myself, but just closed two old accounts I don't use anymore. At the same time though, it's probably good to have at least a few lines of credit at all times even if you don't use them much.

I'm down to one credit card with a $5k limit, a $10k equity account, and my mortgage of $200k. I don't have any current balances on the credit card or equity account.

 

[kranky]

In general, don't close old accounts. That will hurt the average length of time your accounts have been open (longer is better).

However, in extreme cases you might benefit. If you had a huge number of open accounts, that might hurt your FICO score and it might be better to cut it back to a more reasonable number. I have about 30 open accounts and my score is very high, so I don't believe it's hurting me - the average length of time they have been established is probably helping me.

Remember, the FICO formula is a secret. There is no way to say "If I do X, my score will change by Y."

 

[Gibson486]

Never make a late payment (later than 30 days) and you will be fine. That is all that matters.

Why do people say to pay it full?

Credit usage is also used for credit scores. If your revolving credit is close to your limit, then that is a bad sign. As a result, people mistook this and turned into too paying it off in full is much better than leaving a balance. This is only true if you have utilized a big portion of your credit. If you have a credit line of 3k, and you leave $200 balance on your credit card, it will not reflect badly at all since your ratio is not tha bad at all. That being said, I maxed out all my credit cards last year and it only put a small dent in my score. It does do stuff to yoru credit when you utilize your credit to the max, but it wount kill your score (drop by 100 points) by any means.

 

[dullard]

Originally posted by: Gibson486
Never make a late payment (later than 30 days) and you will be fine. That is all that matters.

Why do people say to pay it full?

Because, needlessly paying a huge percentage rate on your credit cards is a massive waste of your own money. The main reason to have a good credit score is to save yourself money. Thus, why waste so much money in your attempt to save money? It just doesn't make any sense.

The only logical thing to do is to use a CC responsibly, pay it off in full and on time each month, and if you need more money get a real loan at a low interest rate.