Does paying minimum payment hurt your credit score?

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CUW
 
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Does paying minimum payment hurt your credit score?

Postby CUW » Mon Jul 25, 2011 2:12 pm

Hey forum got a question for ya. Does paying the minimum balance/payment hurt or negatively affect your credit score? I know to the human eye it may not look attractive but when I say hurt what I am mainly interested in whether it affects the FICO credit score. Thanks!


Money card
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Postby Money card » Mon Jul 25, 2011 3:54 pm

yes it will absolutely affect your score. somebody I know doesn't pay their credit cards in full and they told me that they have a very low credit score.

somebody from jp morgan said it depends on how much you borrow and how you pay back. so if your minimum is 10.00 a month, you will get yourself in a lot of debt unless you don't charge a lot. my recommendation would be whatever your bill says, whatever you spend, you pay back.

LTomBerry
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Postby LTomBerry » Mon Jul 25, 2011 11:02 pm

A little clarification: The only way that paying the minimum affects your FICO is to the extent that it affects your credit utilization ratio. If you keep racking up debt and only paying the minimum you will use a larger percentage of your available credit which can drop your score.
The score does not factor in what your last payment was. A lender cannot tell by looking at your report whether you pay in full every month or carry a balance.


CUW
 
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Joined: Mon Jul 25, 2011 2:02 pm
Location: Madison

Postby CUW » Mon Jul 25, 2011 11:38 pm

Thank you for the insight! To confirm, let's say I had a $2,000 balance and my minimum payment was $50. If my balance for month 2 was $1950, month 3 was $1900, month 4 was $1850 and so on that wouldn't be a problem? I guess what I'm trying to say is if there's no new spending and it's clear you are paying the minimum payment on a balance like in my example, the FICO credit score won't calculate anything against me for doing that?

LTomBerry
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Postby LTomBerry » Mon Jul 25, 2011 11:49 pm

Correct. By doing that you are actually improving your score by slowly lowering your utilization ratio, and by making on time payments. The FICO scoring model doesn't care how much your last payment was, it looks at a snapshot of your ratio that month, as well as your history of on time payments, plus a few other things. Here's a helpful link straight from the horse's mouth:
FICO Credit Score Chart: What's In Your Credit Score?



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