Quick question about utilization

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scorch
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Quick question about utilization

Postby scorch » Sun Feb 22, 2009 10:22 pm

I have two credit cards. Would it be better for my credit rating to keep the balances on them at $0 or to make small purchases on them and pay in full each month?


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fffresh
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Postby fffresh » Sun Feb 22, 2009 10:45 pm

Be sure to make purchases on them occasionally. Many credit card companies are known to stop reporting customers cards to the credit bureaus of they are not used for an extended period of time; typically after 12 months or more of no activity.

The real danger now however is the creditor canceling your card for no activity. Many banks are canceling customers cards and closing the accounts if they are no longer using them, more so now that they are short of funding.

For credit utilization it is best to allow the balance to remain on there until the billing cycle closes. Once you receive the bill, pay it off in full. If you pay the balance off before the statement close it will reflect as $0 being used during that cycle. However be sure to keep the credit utilization lower than 30% at any given time.

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Postby scorch » Sun Feb 22, 2009 10:55 pm

fffresh wrote:For credit utilization it is best to allow the balance to remain on there until the billing cycle closes. Once you receive the bill, pay it off in full. If you pay the balance off before the statement close it will reflect as $0 being used during that cycle. However be sure to keep the credit utilization lower than 30% at any given time.


So it is better to let the bill show a balance because they might close the card(s) due to non-use?

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Postby fffresh » Mon Feb 23, 2009 12:00 am

scorch wrote:So it is better to let the bill show a balance because they might close the card(s) due to non-use?


You will want to show the balance after the statement close for your credit record in general. As far as internally at the credit card company, any use will count as use on the card; you won't need to carry over the balance for that reason. You can make a purchase on the card an pay it off the same day and the credit card company will consider that usage of card, and ensure the card is not closed and credit reporting continues.

However if you want it to appear on your credit record that you are using the card, that is where you need to allow the balance to remain on there until the billing cycle ends. This is because the balance on the account when the billing cycle ends is what gets reported to the credit bureaus.



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