3

If I own a credit card and I used it for a while (say 6 months) and after that I decided to stop using the credit card and use my debit all the time.

How will this influence my credit score?

Being in Canada, I looked at the types of credit reports there are. For a credit card it is a revolving credit (R0-R9).

So, after a period of time of not using the card, what report will there be?

  1. Not R0, since the card is not new

  2. Not R1, since no balance

  3. Maybe R6, since it's called "This rating does not exist" (or I misunderstood)

Thank you.

2

It is R1, "paid within 30 day."

I believe that the scoring is similar to what is used in the States. That card will have no balance, and if your outstanding balance is zero, not even 1% at billing time, you are penalized, (in terms of your score) by using the card so your balance is over 1% of your available credit, you optimize your scoring. Of course, you should pay in full, and not pay interest. If you have a $5000 credit limit, just charge some gas or groceries, $50-$100/mo to optimize the score.

Next, the account age itself is valuable, the longer your average age of accounts, the better that part of your score.

Last - my initial thoughts on Canada having a FICO same as US was confirmed at a web site Canadian Credit Center. They link to sell you your FICO score (of course).

  • So, you are saying that the report will show R1 (even though I won't have any balance, since not using the card), but the R1 itself has a number on its own? I thought that the amount of money you spend (or %) is never reported. – Alexandru Luchian Sep 12 '11 at 15:51
  • R1 is how it will show. From the site you linked: "Pays (or paid) within 30 days of payment due date or not over one payment past due." It will show that way as long as the card is active. Of course if you cancel the card, that will show as well for a time. – JoeTaxpayer Sep 12 '11 at 16:16
  • Thanks for the answer. You stated that it's best to use your card at 1%-20%, so for my $5,000 credit limit I have to use at least $50. I am relatively new to credit cards. So if I spend $50 and pay it back as soon as I see the charge online will that work or do I have to wait until the end of billing period and then pay? I usually pay back the amount ASAP. Thanks. – Alexandru Luchian Sep 12 '11 at 16:24
  • 1
    Read my article linked above. (Yes, shameless self-promotion) It tells how one cycle I paid in full prior to bill getting cut, and showed zero utilization. My score dropped because of that stunt. Pretty funny. – JoeTaxpayer Sep 12 '11 at 16:40
  • I did read it. But still didn't understand some things. So, I should wait until the end of the current billing cycle? I just don't want to be charged % for waiting too long. And by "priot to bill getting cut" - that means before end of billing cycle? Sorry for so many questions, I am trying to understand. Thank you. – Alexandru Luchian Sep 12 '11 at 16:45

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