How do I use a credit card to raise my credit score?
Asked by
spendy (
1449
)
May 15th, 2008
I know that paying more than the amount due (on time, every month) would raise my score. However, I usually make payments against the charges before they are even billed. So, when I get the bill there’s nothing due. Does this have the same effect? Or would it be better not to pay until the bill comes and then pay the entire balance, plus interest? What’s the best way to use a credit card for raising your credit score?
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12 Answers
Always paying your bill on time keeps your credit score intact, carrying a balance doesn’t hurt you. To improve your score, have as few credit cards as possible and keep the credit limit low. Credit scoring companies look at how much credit has been extended to you as well as your paying history.
I thought that the credit companies looked at the credit that has been extended to you in relation to how much you OWE against said credit. I keep my limit low and pay before anything is ever “due”, but I thought that having a higher limit and simply not using it would be better. No?
@Marina, thanks for the great link. It looks like I was correct about the balance-to-limit ratio. Also didn’t know that using more than 50% of your limit caused a decrease in points. I guess I’m wondering if that matters when there’s no balance at the end of the month or if it is detected within the billing cycle, before EOM billing.
I’ll clarify what I said earlier. My brother-in-law worked for Fair Isaac, the company that computes the credit score. The balance-to-limit ratio is irrelevant in the short term but if it is chronically high, yes, it will have an effect on your score. A much higher weight is given to your total outstanding credit potential since on any given day, one could potentially max out all your cards. Their algorithm also weights heavily on time, if you have a long credit history with a track record of paying on time, that will discount having more credit cards with a higher limit. My own credit score reflects this, it creeps up over time without much change in my credit profile.
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@reed, gotcha. That makes sense. So for someone who has “repaired” their credit, so to speak, and is on the up-swing…the best bet would be to maintain low limits and just pay on-time, as usual. Nothing fancy. Right? I’ve paid down all debt except house and car and carry only 1 credit card for which I have requested a low limit. I pay the balance monthly before the cycle ends. Anything else?
@Owly, thanks! Nice link.
Stay away from capital one. Everything else got covered.
You just use it a lot and when you pay the bill, pay the full amount and not only the amount that is due. You’ll get to build credit because of that.
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Charge less than half of your credit limit then pay it off on time. Charge monthly
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