Credit Score

[stutotherescue]

Hi, I was wondering which helps my credit score more. Should I pay off my credit cards every month in full or should I pay off my credit in monthly installments? I would pay off the bill every month, but I was told that may not build my credit score.

[jmjj215]

Re: Credit Score

It will build your credit score if you pay it off every month. Do NOT carry a balance! That costs too much money.

You should also consider not pushing ponzi schemes in your signature links:

Ponzi schemes are a type of illegal pyramid scheme

Also, more at the Securities and Exchange commission on pyramid schemes.

[Ima saver]

Re: Credit Score

You should pay them off every month and carry zero balances.

[cercis]

Re: Credit Score

Stu - the companies use a balance to limit ratio, so the lower the balances, the better off you are. BUT, they report at different times per month, so it might not make a huge difference depending on when it is pulled. For instance, if they report right before you pay it off, then it will show as a high balance, even if the next day you paid it off.

[katwoman]

Re: Credit Score

1) Carry a balance ONLY if it a very lo- or better yet - 0% offer and you are paying this down. Always pay more than the minimum.

2) Increase your existing credit lines, if you can. That is, the important ones like Chase, MBNA, Visa, MC. Not store cards.

[ender513]

Re: Credit Score

I think you might be confusing the length of your credit history with how installment loans will show up on your credit history. In general your score will improve the longer you have a credit history. This is true regardless of whether you carry a balance on credit cards - it's how long since you *established* a credit account.

That said, not paying off your credit cards in full might have other consequences such as paying interest.

Your credit score takes into account length of credit history (when you established a credit card or installment loan) as well as how much of your revolving credit balance you use. It's probably a good idea to continue to use your credit card, but pay it off each month. This will still build a credit history.

[Bluezy]

Re: Credit Score

Pay off your balance every month. Like clockwork.

[Harrison]

Re: Credit Score

Just a piece of my mind:

Why Credit Score appear in this world? For me, I think it is a system to let others "analysis" your financial status and how trustworthy you are. People like banks always wants to know how you manage your money and what is the level of your credit and base on this they determine how much money they can lend you.

So if you want to increase your credit score, just showing them that you have the intention to payback the money and at least you are able to pay the minimum monthly installment.

Anyway above is just what I'm thinking, if I'm wrong please let me know. I also ready to learn about Credit Score.

[jzunic]

Re: Credit Score

Just a quick note with a problem I ran into. I moved down to the US in 2002 and was able to get a First Time Borrowers CC through a local credit union in order to start building my credit history. I used the card regularly, but paid it off in full every month.

When I applied for a Citibank CC 2 years later, I was denied. I called in several times to get an explanation, and was told that because I paid off my CC every month, it essentially looked as though I never charged anything to it, so they couldn't determine whether I would actually make my payments. I asked if I "needed" to carry a balance (and pay interest) in order to improve my credit score, and she said yes.

Whether this info is valid or not, I'm not sure - I didn't listen to her and just waited it out, and got a couple store cards to try to build my credit history. We've since been approved for a Chase CC, but that was a couple years later...

[sweeps]

Re: Credit Score

Apparently you're right, jzunic. This Fair Isaac booklet (page 12), implies that carrying over a small balance is better than paying off in full.

Personally I think it's ridiculous. How can Fair Isaac say that someone who continually carries over a balance is less of a credit risk than someone who routinely pays off his balance each month? They probably got a nice bonus from the credit card companies for that one.

[flash]

Re: Credit Score

It's true, for your credit HISTORY, you need to establish that you used and paid the card, not just opened the account. Risk is considered less if you prove that you can manage CREDIT, and pay it over time (basically so that if you have a debt like a mortage you can't pay off in one month, you have shown that you can manage and be responsible over a longer term payment schedule).

There is a balance, in that you need to show you paid it off in a timely manner. Making small or minimum payments counts against you.

Timing during the month matters, as someone else stated.

[lrjohnson]

Re: Credit Score

We have a Consumer Credit Counseling place in town, and as they are non-profit and I'd heard great things about them, I had them run my credit reports for me and give me an analysis. I asked that exact question, should I pay off at once or leave a balance, and he said that if my only concern was to build credit (I didn't need to borrow or have problems with spending) that I should feel free to pay it in full every month. He also stated that I should use it relatively frequently, perhaps use the credit card to pay a small monthly bill. then immediately pay off the credit card.

So page 12 of Fair Isaacs did shock me a little.

[sweeps]

Re: Credit Score

It's true, for your credit HISTORY, you need to establish that you used and paid the card, not just opened the account. Risk is considered less if you prove that you can manage CREDIT, and pay it over time (basically so that if you have a debt like a mortage you can't pay off in one month, you have shown that you can manage and be responsible over a longer term payment schedule).

There is a balance, in that you need to show you paid it off in a timely manner. Making small or minimum payments counts against you.

Doesn't charging purchases and paying them off every month prove that you can manage credit? I can understand using installment loan payments to prove good credit management, but if I were the one creating the FICO algorithms I certainly wouldn't give extra credit to someone who leaves balances on revolving credit.