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I have a dilemma understanding how and when I should pay my credit balances. At the moment I am using two credit accounts, one is from BofA and the other is from Discover. I always keep paying the balance once the payments are posted or after a max 1 week. This month my FICO scores got impacted by multiple high balances.

So if I'm not wrong, the credit companies reported my balances within a period before I pay them. I never skipped a payment and I hardly see a payment due amount on any of my accounts.

What's the best way to deal with multiple credit cards?

More INFO, I have 3 cards, one of which I don't use and almost carry no balance. The credit lines are 5000,6500 and 700.

The max spending that I hand on both cards that I use is below 300$ combined.

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    What is the sum of the balances on your cards divided by the credit limit? For example, if one card has $800 and the other has $600 at the time it is reported, and each card has a $1K limit, the answer would be: 1400/2000 = .7 = 70%. The higher that number, the more your credit score will be impacted. – TTT Aug 4 '17 at 15:19
  • @AhmadAbuMaizar, did you look at your credit report, not just your score (and the "advice" given to you by whatever service you used to see your score) but your actual report? – quid Aug 4 '17 at 15:21
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    @AhmadAbuMaizar - Your utilization is at 2.5%, which is a nice low number. But in your question you said your FICO scores were impacted by "multiple high balances". $300 out of $12K doesn't seem like a "high balance". Can you clarify? – TTT Aug 4 '17 at 17:17
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    I don't think reporting $300 or $0 (out of $12K) would make that much difference to your score, so I suspect something else is causing the change. – TTT Aug 4 '17 at 17:45
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    Your balances are generally reported when your new statement is generated. If you want to avoid spikes in your balance/utilization from charges you made during the month that you intend in paying in full, you need to pay them before your statement date. – iheanyi Aug 4 '17 at 23:32
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I don't think your problem is payment timing - it's credit utilization. You are using a relatively high percentage of your credit limit each month (despite the fact that you pay it off on time). Rightly so, this in considered a risk by the credit agencies (what happens if you can't pay the balance for some reason?)

Based on this, here are some options:

  • Don't charge as much - obviously reduces utilization
  • Request a credit limit increase - may or may not be feasible depending on income
  • Get another card - would improve your overall utilization, but the negative impact due to the change to the number and age of accounts might more than negate the positive effect of a lower utilization
  • Do nothing. Does the impact to your credit score change your life? If you pay the balance every month, in the long run, that should count more that your utilization. Over time, as your income increases, you will get bigger credit limits, reducing your utilization.

Don't run your life around an arbitrary "credit score". If you want to use credit cards for perks/convenience, that's your right, but to arrange your spending habits around some score that won't mean much so long as you don't make bad decisions is foolish. Remember that banks have a vested interest in people charging more, and some of the credit score rules are geared to incentivize you to borrow more money. Do what makes the most sense for you, and let the FICO chips fall where they may.

  • Thankfully my life doesn't depend on it at all, on the contrary I was never a fan of borrowing and I always spend from what I have. I am relatively new in this country and I was told that I need this card to build my credit history for future. I m just using it for this purpose and I m finding hard time to figure out the best way of using it. Each score fluctuates, not drastically, but I want it to stabilize – Clicker Aug 4 '17 at 21:23
  • Unless you are close to getting a large loan (mortgage) I would not lose any sleep over credit score. It sounds like you already have the right mindset and behavior to have good credit. Anything over 740 is considered "excellent" and there's no point in tweaking it above that. – D Stanley Aug 4 '17 at 21:25
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    Many in this country put WAY too much stock in credit score. It is an measure of prior behavior that is used as a partial indicator of future behavior. If they spent as much time making sure their bills were paid on time and didn't borrow as much they have better results than trying to game the system. – D Stanley Aug 4 '17 at 21:27
  • Mine is fluctuating around it, I have been in the US since October 2016 and I don't mind say my score , was 741 and dropped to 735 – Clicker Aug 4 '17 at 21:27
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    You're doing great. You're already doing what I encourage in others - pay your bills on time, don't borrow more than you absolutely need to, and you'll be fine. Even a 735 might get you the best rates if other factors (loan-to-value, debt-to-income) are good. – D Stanley Aug 4 '17 at 21:29
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In addition to the existing answer, consider -

If, and only if, you have a reason to want to game the score, i.e. maintain the higher level FICO, while still using the cards often, use this strategy.

Until recently, I'd have told you that the utilization and balance come from the statement balance, you can pay in full, never pay a dime interest, and still have a 90% utilization. I, and others here, have maintained it's the statement balance that's reported. And until a few months back, no one had evidence to the contrary. It was at that time, my favorite card, a 2% cash back card, changed banks. I had been in the habit of paying my cards in full, the day before the statement was cut, and maintaining a 1-2% utilization. Until the new card came and my score dropped some 25 points. I came to find out that the balance was sent on the last calendar day of the month. And for that card, that's now when I pay it.

To be clear, you can easily use any of the free credit sites (I use Credit Karma, mostly) and find out when the balance is reported. That day may not coincide with the statement, and you may need to cut another check to satisfy the statement cycle as well.

Last - utilization has no memory. In general, I'd take D Stanley's advice, and only shoot for the higher score in advance of applying for new credit.

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    +1. I always suspected the reporting date was bank specific, but never had any proof until now. Excellent evidence. – TTT Aug 4 '17 at 16:21
  • So, let's say that the credit card cycle ends tomorrow and I have x balance on it. Does it count to pay one day before the end of the cycle or I should calculate at least 2-3 days before just to make sure that my payment gets posted? – Clicker Aug 4 '17 at 21:16
  • My bank does a direct transfer, so if the bill were cut tomorrow, I'd need to sign in today and set up the payment. If I weren't 100% sure of the timing, I'd make a few small payments over the next few weeks to be sure. – JoeTaxpayer Aug 4 '17 at 21:20
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The best way to deal with multiple credit cards it to be proactive in managing them. I have multiple credit cards and I always make a payment on them before they close the cycle*. Banks will report the balance that is on your statement to the credit reporting agencies. So I pay a majority of the balance off before the cycle closes. I also schedule my payment due dates so it works around my pay schedule. So while having a high credit utilization is a huge factor, if you are proactive in managing them then it should not impact your score negatively.

*Let's say I have a credit card with a limit of $1000. My statement closes on on the 6th of every month. I max out my card. But on the 1st of every month, I make a payment for $900. So when the cycle closes on the 6th, I only have a balance of $100, which is what is reported to the credit bureaus.

  • I never maxed or Carried big balances – Clicker Aug 4 '17 at 20:37
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Have you looked at your actual credit reports to see for yourself what is actually being reported or are you just relying on a score and "advice" from whoever is giving you the score?

The most eye opening credit-related thing I ever did for myself was the first time I pulled my credit reports to see what is being reported.

Go to annualcreditreport.com and get your reports, there is no cost and it doesn't impact your credit. For all you know there's a maxed out fraudulent credit card on there that you didn't know you had.

Right now everyone is playing 20 questions. You've never maxed out a card, your utilization is less than 5%, you pay the balances before the statements are generated. Go get your report(s) and look at the information instead of blindly listening to what Discover thinks about a change in your score.

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    You are right, the misconception that I had is that requesting a report might considered as an inquiry, I will check it this evening and see what's going on, big thanks again – Clicker Aug 5 '17 at 18:25

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