Business & Finance Credit

How Credit Card Balances Affect Credit Scores

Getting confused about how to use your credit cards for the best effect on your credit scores? You know you need credit card accounts - you've been cautioned not to close any accounts, especially your oldest accounts.
You've heard that you shouldn't carry a balance of more than 30% of your available credit in a given month.
You know that if you do charge more, you should go on line and make a payment before your monthly credit card statement is generated.
But, do you need some kind of balance on those cards each month? It turns out that yes, you do.
But you don't need to carry that balance and pay interest on it.
The best strategy for using a credit card to raise your credit scores is to use it each month for some small purchase - and then pay the balance in full when your statement arrives.
This demonstrates that you're using credit wisely and paying your bills on time.
That factor is one that has frustrated more than one cash purchaser when they've tried to get a mortgage loan.
Many cannot understand how they can have poor credit scores when they don't owe a dime.
But not owing a dime doesn't prove a thing to creditors.
They want to see that you can owe, and then pay as agreed.
Thus, seeing a small balance and a notation that indicates "pays as agreed" looks better and will improve your scores more than seeing no balance.
35% of your FICO score is based on your payment history - how you handle debt.
Your credit card debt is reported to the credit bureaus when your statement is generated each month, so the dollar figure that you owe on that day is the number that's reported.
That's why it's so important to pay large balances before the statement is generated.
The way credit reports are set up, no one can see that you charge $4,000 in business expense each month, and then pay it in full.
All they see is the $4,000 balance.
If the credit limit on your card is $4,200 - it looks like you've borrowed to the maximum.
30% of your FICO score is based on the amount you owe vs.
the amount of credit available to you - so keeping debt under 30% of available credit is a huge boost to your scores.
If you think you may want to use credit in the near future, start using your credit cards as a tool to boost your credit scores.
Sometimes just a point or two can make a difference in the interest you'll pay.
SHARE
RELATED POSTS on "Business & Finance"
Have You Heard About the Credit Card Bill Stimulus Package and How it Can Help You?
Have You Heard About the Credit Card Bill Stimulus Package and How it Can Help You?
Credit Repair Service - Is it For You?
Credit Repair Service - Is it For You?
The FTC Provides Resources To Help Consumers Get Out Of Debt
The FTC Provides Resources To Help Consumers Get Out Of Debt
The Short Cut to Credit Card Success - How Credit Comparison Tables Can Half Your Research
The Short Cut to Credit Card Success - How Credit Comparison Tables Can Half Your Research
Fix Your Credit Report Errors
Fix Your Credit Report Errors
Credit Cards with Zero Interest
Credit Cards with Zero Interest
How Business Credit Can Help in Growth of Your Business
How Business Credit Can Help in Growth of Your Business
The Mystery of Credit Card
The Mystery of Credit Card
A Bond Co-Signer's Rights
A Bond Co-Signer's Rights
Canceling Credit Cards and Credit Scores
Canceling Credit Cards and Credit Scores
Most Common Credit Repair Myths Debunked
Most Common Credit Repair Myths Debunked
Credit Counseling - Not Because You're Crazy, Either
Credit Counseling - Not Because You're Crazy, Either
Credit Cards For Poor Credit
Credit Cards For Poor Credit
Credit Card Approval - Some Simple Hints
Credit Card Approval - Some Simple Hints
Low Interest Balance Transfer Credit Cards - Is it a Great Deal Or is it a Trap?
Low Interest Balance Transfer Credit Cards - Is it a Great Deal Or is it a Trap?
Instant Approval Credit Cards And Why They Are Highly Beneficial
Instant Approval Credit Cards And Why They Are Highly Beneficial
Credit Card Debt Relief and FICO Scores
Credit Card Debt Relief and FICO Scores
The ‘80/20’ Rule in Ghana’s Banking Industry, is it Helping Us?
The ‘80/20’ Rule in Ghana’s Banking Industry, is it Helping Us?
Your Credit Card & the Interest Charges - Do You Really Understand the Interest Calculations?
Your Credit Card & the Interest Charges - Do You Really Understand the Interest Calculations?
3 Credit Mistakes That Can Ruin Your Credit Fast
3 Credit Mistakes That Can Ruin Your Credit Fast
How to Get a 740 Credit Score
How to Get a 740 Credit Score
Your Credit Report and Credit Score Explained
Your Credit Report and Credit Score Explained
Debt Settlement Claims - Take All Big Statements With a Pinch of Salt
Debt Settlement Claims - Take All Big Statements With a Pinch of Salt

Leave Your Reply

*