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How can I use my new credit card to maximally benefit my credit score? (lemmy.world)
submitted 1 month ago by to c/nostupidquestions@lemmy.ca
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  • for bills, is having it on autopay with the biller superior to using it manually to pay that biller? I prefer to manually manage all that as I have for years but I figure its beneficial to get that on a credit card and just make sure its paid off. I already basically use a bills bank account to do essentially this manually

  • only purchase what I already have set aside/budgeted for and can payoff before the grace period

  • anything else?

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[+] -7 points 1 month ago* (16 children)

Because the credit score is really a ‘ how safely milkable are you’ score it counterintuitively benefits you to keep a balance on the card that isn’t over some threshold. You can sign up for their free credit score monitoring service and observe where that balance lies for each service somewhere around 40-60% but don’t quote me in that.

Too high of a balance and you’ll lower your score. Carry a mild balance and increase your score. Pay that balance off and take a small hit.

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  • [–] 7 points 1 month ago* (last edited 1 month ago)

    This isn't exactly true. I have a score above 820 and always pay my entire credit card balance off before it's due every month to avoid interest. In fact, most of my cards get almost no use, except for the one with the best benefits. I use the others sparingly, I only use them twice or so a year to keep them open.

    I say "isn't exactly true" because of two things. Normally, the balance reported to the credit agencies aren't what the balance was when it was due. It depends on when the lender reports it to the agency. For example, most of mine appear to be mid-cycle. This allows me to pay it off with no hit to my credit, so long as I just keep using it regularly.

    Second, if you have any other type of loan (car, mortgage, personal, etc) then it really doesn't matter. Those will almost always have a higher balance and payments anyway. Your credit score isn't from one single source unless you are brand new to lending. It actually will lower your score if you only have one loan as well, so it's important to keep accounts open (meaning you need to use your credit cards so they don't get closed) and in good standing.

    Always pay credit cards off entirely so you don't give the bank your money. Always.

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  • [–] [S] 4 points 1 month ago* (9 children)

    Like, say I spent 2500 to buy some big ticket items ive already saved for, when should I pay off that balance or to what extent should I pay it down and let that milkable amount you were talking about,

    I was going to pay it off next week, should I wait till next month to pay it off or longer, obviously gotta find out and make minimum payments so thats the floor but what is the ceiling according to what you've suggested?

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  • [–] 10 points 1 month ago (4 children)

    The person above had absolutely no idea what they're talking about. Pay your balance every month. My credit is great now and I defaulted on my student loans 20 years ago. Never give the CC company a cent. Maximize your points, autopay your balance on time every month. Switch/add a card when you can qualify for a more rewarding card. Go spend some time reading NerdWallet. Don't listen to 14yos on forums.

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  • [–] 2 points 1 month ago* (3 children)

    I have a 780 score and have helped several friends and family build their credit including coming back from a bankruptcy this stuff is a hobby for me. OP was asking about credit maxing and that’s how you do it.

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  • [–] 1 point 1 month ago

    Its arbitrary though. My score was that and I had $45k debt at one point due to divorce and a move etc. They only care that you keep making payments to show they can offer you more ways to get in debt. Its stupid to pay interest to get a highacore.
    Then there was my wife who barely had an credit cars and no other assets or debt and she was over 800 somehow.

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  • [–] 5 points 1 month ago* (last edited 1 month ago)

    Like others are saying, pay it off every month. Ideally, you’ll want to keep the usage around 10-30% max. If you have a $5000 limit, that would be a monthly usage of $500-$1500. If you max it out, banks will assume that you’re a risk and will ding your score.

    Keeping it below 30% will also help grow your limit. Banks will periodically up it. This is also based on reported income, but from experience, if you have a low limit and max it every month, they will not really increase your limit.

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  • [–] 3 points 1 month ago*

    As another person already said, the guy you're replying to doesn't know what they're talking about. But what they're saying is a common misconception, and I'll explain why.

    -depending on your billing cycle, at some point in the month the credit card company will do two things on the same day: 1) generate a billing statement for you with the amount you owe and due date and all that 2) report how much you OWE THAT DAY and also WHETHER YOU PAID YOUR LAST MONTH'S CHARGES to the credit bureaus.

    -for 2), it is a snapshot in time. If you've charged $500 throughout the cycle, what is REPORTED to the bureaus is that you have $500 charged, which shows you're using your card.

    You can come in the very next day, pay off ALL $500 and pay NO INTEREST and your credit score goes up. You DO NOT NEED TO CARRY A BALANCE and pay interest (bad) because your usage is only reported once a month, not day by day.

    So, people conflate using a card at all (which you should do in order to build a good credit history) with carrying a balance, because they don't understand how their information is reported.

    So:

    -get a card

    -use it to pay for stuff you already were going to buy

    -try not to charge more than 40% of your credit limit on the card

    -pay it off IN FULL every month

    -profit (literally - as your credit gets better you'll have access to cards with better rewards and benefits)

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  • [–] 2 points 1 month ago (1 child)

    Treat your card as if it were a checkbook.

    Hook it up to a bank account that covers twice the card’s credit limit. You can pay it off once a month, or pay it off whenever you approach the limit; which method you use depends on your limit and spending habits.

    Autopayments are good — the reason you hook it up to an account with a relatively low balance is so you have a throttle on your spending AND so if the anti-fraud protections miss something, you have time to dispute the charges before they get paid off.

    Other things to note: use chip and pin when possible; with chip and pin, any disputes default to being in your favor, with the merchants having to prove why that shouldn’t be the case. If you use tap, it’s all on you to prove why it wasn’t you who made the charge.

    Using this method, paying all my utilities etc. through my credit card, I got my credit rating above 80 in a few years.

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  • [–] [S] 1 point 1 month ago* (3 children)

    The limit is 5000 so what amount are we talking here?

    Like 21% interest so I want to be careful but Im receptive to your point

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  • [–] 7 points 1 month ago* (1 child)

    Oh lord well don’t CARRY a balance and pay interest just use the card for everything you don’t mind being tracked about and pay it off every month. This way you keep an average monthly balance but you don’t pay interest. You also can earn points with a good card most of my kids Xmas gifts come from points I save up all year just paying my regular bills.

    If your nut is very tiny this won’t be much but I keep car payments, insurance payments, phone bill, every monthly bill I can on a card and pay it off every month before any interest accrues. if you’re lucky you can put rent on there. I don’t know what the exact percentages are sorry just have been gaming credit cards for years and know the score is highest if you keep them in use.

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