Better to pay in full each month or leave small running balance?

[pathfinders]

Hi ALL

My wife and I are working on rebuilding our credit.

Post Discharge we both have a Cap 1 Card, 750.00 Credit limit.

Have heard different theories as far as gaining points to your credit score.

1) only or never charge more than 1/3 of your credit line . ( true? comments?)

2) Is it better to pay the card in full each month or leave a small balance say $10.00 Dollars per month. ( Thoughts on this please as far as getting the max out of your credit score to keep repairing credit and inching your score higher)

Thanks .....

[AngelinaCatHub]

It is ALWAYS better to pay it all. In fact if you can spare it a couple bucks more. Have a credit balance. I know as at one time I did this (when we had bucks) and my score was 820.

The card activity itself is judged. The unpaid will still accrue interest. I myself pick up a penny when I see one in a parking lot. It spends just the same. Do you want a mil of a penny charged against you? It is always rounded up you know. LEARN!!!! It is your money. Go cash is what I say, but if you MUST, pay it all. I give a rodents bottom what my credit score is. I don't have the cash, I don't need the item, plain, simple. My opinion. 'Hub

[tyson24]

I love you Hub'. My sentiments on the cash thing exactly. No CC's for me after this whole shenanigan...no way.

I would definitely pay it off every month. If you have to use it, just buy gas and pay it. Write the check and out it in the mail the same day.

[SPalin]

I agree to pay the account in full, but why send in a check (that will take days to get to it's destination and possible lost), when you can use your Bank's billpay and it will be posted to your credit card account the next day? You also save on the cost of the stamp!

[hillaryg]

uhhh i was just discussing this with hubby... we put $30 mo on the cc just to rebuild since we dont need it and he paid half of it last month!!! ERRR!!!

[jadams]

Never let a balance run for purposes of credit building.

You lose your grace period when you don't pay the prior statement balance in full before the due date. That means interest begins immediately on new purchases. Not only will it have little to no positive effect on your credit score, it's going to cost you month. Even if its just $1, that's $1 you don't need to waste.

Except for the very rare oddball credit card issuer, card companies will report your account as positive "pays as agreed" every month -- even if you have no activity and a $0 balance. You only need to charge something every few months so the issuer doesn't close your account for inactivity (6 months being the more common period until you risk closure). You could charge $5 and immediately do a bill pay for $5 and be all set for a few months.

In fact, with the tiny credit limits common with rebuilding -- using your card and letting a balance report (i.e not paying the balance down before the statement cuts) can kill your score. FICO considers a $250 balance on a $300 line the same for utilization purposes as $25,000 on $30,000. Maxed out is maxed out, even though in real life those two situations aren't necessarily the same.

All you need to rebuild is one card that stays open and reports every month. A $500 secured card or a $300 HSBC unsecured will do this. Use it once every few months for a small purchase (or something easy like a recurring $15 bill every month). Schedule an automatic bill pay to pay it in full.

Time is what's needed to overcome the negative of bankruptcy on your report.

[CCsAreEvil]

Probably the ONLY time you "might" want to leave a small balance on your credit lines is in the rare event you are about to purchase (and finance obviously) an auto or a house. Otherwise, there's absolutely no reason to leave a balance.

When your real FICO scores are checked, a snapshot is taken. It adds up all your outstanding/owed balances as well as your total available credit. It divides these numbers. It's been shown that 0% utilization across all your credit lines will actually result in a slightly lower FICO score than if you had ... let's say 5%-10% utilization. It sounds stupid but that's how the FICO algorithms were modeled.

Here's another scenario... (numbers are made up but it's just to show a point). Let's assume you have a $50k total credit limit (summation of your credit lines).

Let's say in Oct 2010, the total of your balances on your credit cards/lines is $49k which comes out to 98% overall utilization. If someone checked your FICO score at this point, let's say your score comes out to 650.

Now in Nov 2010, you pay off the FULL balance and now you have 0% utilization. Your score would probably jump to 730 or something. If you probably paid down and only owe $1k, maybe your score would go up a few points to 735. Who knows.

There are several FICO score simulators out there. They won't be exact but you can plug in numbers and play around to see what happens.