To raise credit score should i pay off credit card immediately or stretch out payments over a few months?
I don’t have debt by any means, first and foremost. I am just starting to live on my own and build my credit and stuff. I got a credit card to help me do that and right now my balance is around $600. I can easily pay this off in one month and not think about it again but i heard that won’t raise your credit score any. Someone told me that it is good to leave some balance on your credit card. So, I was wondering should I stretch out the payments over a few months? I would like educational answers only please. I want to do whatever is best for my credit score.
People think that having a balance raises your credit score becuase it records "payments" each month.
But that’s not true. The only thing that a credit card reports is if you are "current", "30 days late", "60 days late," etc.
Having a 0 balance and thus no payments is the same as being "Current".
Also, that balance should be below 33% of your limit– so if you’re above 1/3 the limit (like if this was a $1000 card) you’d be helping to pay it off.
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it is better to pay off the credit card and continue to make small purchases paying the balance off completly every month. a remaining balance incurrs interest fees which you do not want.
Having the credit card open for a year, showing you pay the entire balance every month boosts you credit score (called revolving credit)
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Think about this……your credit card company reports once a month the the credit agency….what if they report each and every month right BEFORE your payment (in full) hits……on paper it would appear that you DO carry a balance……
it does no good to purposefully stretch out the payments to demonstrate your ability to pay on time…..that’s not what your FICO score is looking at…..it’s looking at how you handle your available credit…….
you have to find your balance of available credit vs. used credit…..if you use $600 of your $1,000 available credit each month…..you are using up 60% of your available credit…..not good…..its a balancing game….
same w/ too much available credit…..
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While it’s not the worst thing in the world to carry a balance, I can’t figure out how it could be a "good" thing.
If you have a 0% rate, it’s not a big deal to carry a small $600 balance. It won’t affect your credit score by more than a few points.
Just avoid making late payments on this account and also your utility bills, and your credit score should be in the 700′s in no time.
Good luck!
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Paying off your balance every month will raise your credit score, lenders look at this as someone who can handle their debt. Also, you can opt out of pre-screened offers (which has helped improve my borrowers credit scores). It’s free and register for the 5 year electronic opt out (means you don’t want to be pre-qualified for loans – lenders shopping for you). Here’s the website:
https://www.optoutprescreen.com/?rf=t
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People think that having a balance raises your credit score becuase it records "payments" each month.
But that’s not true. The only thing that a credit card reports is if you are "current", "30 days late", "60 days late," etc.
Having a 0 balance and thus no payments is the same as being "Current".
Also, that balance should be below 33% of your limit– so if you’re above 1/3 the limit (like if this was a $1000 card) you’d be helping to pay it off.
References :
I’m cutting and pasting this from a similar question that I’ve just answered, but the utilization part applies here:
If you’re looking to improve your credit score, keep in mind that credit utilization is one of the most important factors in calculating your FICO score.
That being said, suppose you have a credit card for $500 and another for $1000, both maxed out. To achieve 50% utilization for each, you’d have to pay $250 towards one and $500 to the other. Overall this would have a better impact on your credit score than paying cards off randomly, or paying off one in total and leaving others maxed.
If you can’t pay off all of your debt at once, I would recommend setting a goal of getting your balances to 50% across the board. Start with the lowest balances first – you will see an immediate impact if you pay $500 towards a balance of $1000 as opposed to paying that same $500 towards another card with a balance of $3000.
Make Your Nut
http://www.makeyournut.com
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Whether you decide to pay it in full or off in a few months time, it will do little for your score. Here’s why: one of the biggest credit factors is "age" of your accounts. You will need to pay your credit card on time for at least a year and probably more before you see a difference in your score.
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