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Should you pay your credit card off every month? - Page 2

post #31 of 51
We pay ours off completely every month (it has a $2,000 limit, so we never go TOO far into 'debt'). We wouldn't even have gotten one, but we're building credit to get a mortgage loan. We also have a loan on our Integra (though we could have afforded to buy it outright), which we pay over $100 extra on every month.
post #32 of 51
Thread Starter 
I'm not sure if you guys helped or confused me! Many different points of view, which actually is nice. Jerry and I luckily can pay off any credit card debt we build over a month, but it just got me to wondering this morning is all if I'm doing us a favor by always paying the full amount every month.
post #33 of 51
Quote:
Originally Posted by kittylover4ever View Post
I'm not sure if you guys helped or confused me! Many different points of view, which actually is nice. Jerry and I luckily can pay off any credit card debt we build over a month, but it just got me to wondering this morning is all if I'm doing us a favor by always paying the full amount every month.
Easy ... get your credit report ...
post #34 of 51
Quote:
Originally Posted by GingersMom View Post
Here is the difference: If you want to IMPROVE your credit score or FICO, then you do NOT want to pay off your credit cards in full every month.
I disagree with that statement. Whether you pay off the entire debt or not per month, the key is to pay the minimum payment before the due date. That's what gives you your credit history. When you make any late payments, that's what effects your FICO score.

Your FICO score is based on 5 things:
1)Record of paying your bills on time: 35%

2)Total Balance on your credit cards
and other loans compared to your
total credit limit: 30%

3)Length of credit history: 15%

4)New accounts and recent apps: 10%

5)Mix of credit cards and loands: 10%

I always paid off my balances every month (up until the last couple of months) and I was always well above the "Best" mark. Now I just make sure that a regular monthly payment gets made and my FICO has remain the same.
post #35 of 51
Quote:
Originally Posted by lunasmom View Post
I disagree with that statement. Whether you pay off the entire debt or not per month, the key is to pay the minimum payment before the due date. That's what gives you your credit history. When you make any late payments, that's what effects your FICO score.
Please point out to me where exactly I suggested that people make late payments or skip payments entirely?

There are a number of different factors that are combined to give you a FICO. Total number of open credit lines, years lines held, highest credit amount, yes, any late payment history, debt to income, I could go on and on.

I rephrase to clarify: If you are aiming to improve your FICO, then it is a smart idea to keep a balance on at least one revolving account while making at least the minimum payments on time, every month.
post #36 of 51
Quote:
Originally Posted by GingersMom View Post
Please point out to me where exactly I suggested that people make late payments or skip payments entirely?

There are a number of different factors that are combined to give you a FICO. Total number of open credit lines, years lines held, highest credit amount, yes, any late payment history, debt to income, I could go on and on.

I rephrase to clarify: If you are aiming to improve your FICO, then it is a smart idea to keep a balance on at least one revolving account while making at least the minimum payments on time, every month.
I did not read your statement as skipping payments. I read it simply as you said it: keep a revolving balance to improve your FICO score. I was simply saying that paying either the minimum payments or the entire amount owed on time improves your FICO score. Making those payments on time contribute to 35% of your credit score.

What I was disagreeing with was keeping the revolving balance. As I outlined in my statement 30% of your FICO score is based on your total balance of credit and loans compared to the total credit limit. So if you have a credit limit of $10,000 and keep a balance of $5,000, that 50% debt-to-credit ratio effects your FICO score in a negative way and lowers it. The lower your balance to available credit, the more it raises your credit score. So by paying off the balance on time each month you keep your FICO score higher by decreasing the debt-to-credit ratio.

Besides, with interest rates that credit cards charge why would you want to keep a constant balance on one of your CCs? Unless that's the part I'm misunderstanding and you're saying to charge at least one thing per month and pay if off on the next bill? I read your statement to mean that you rack up $1,000 on one of your credit cards and just make the minimum payments...then if it gets too low (i.e. you only have $50 left to pay) you go back out and rack up another $1,000. If that's the case, that's just wasting your money because of the amount of interest rates your paying.
post #37 of 51
Quote:
Originally Posted by Crazyforinfo View Post
Good for you.

I actually had the opposite experience. I am sure there were other factors for it too.
The same here. I've been paying off my credit card every month for the last 30 years and my credit rating is in the 600's somewhere - about 15 points away from a perfect score. Now I do have a mortgage balance, but that is my only outstanding debt.
post #38 of 51
Quote:
Originally Posted by Momofmany View Post
The same here. I've been paying off my credit card every month for the last 30 years and my credit rating is in the 600's somewhere - about 15 points away from a perfect score. Now I do have a mortgage balance, but that is my only outstanding debt.
Please correct me if I am mistaken, but isn't the perfect score 800?
post #39 of 51
Quote:
Originally Posted by pipersjo View Post
Please correct me if I am mistaken, but isn't the perfect score 800?
I don't think there really is a perfect score. Mine is in the 800's but I know some with 900's.
post #40 of 51
Quote:
Originally Posted by Crazyforinfo View Post
I don't think there really is a perfect score. Mine is in the 800's but I know some with 900's.
Wow! I didn't know that!
post #41 of 51
Well, even if it might be better for your credit rating not to pay everything, I will still refuse to leave a balance as long as I have the money to pay the whole amount. There's no way I'm paying credit companies high interest rates just so they'll give me a good rating. I'm really stubborn about that.

I think it's really better to pay the whole amount as long as you have the money. If you had a big emergency, then you may take a few months to pay it off, but if it happens all the time, you might need to re-think your budget.
post #42 of 51
Quote:
Originally Posted by Momofmany View Post
The same here. I've been paying off my credit card every month for the last 30 years and my credit rating is in the 600's somewhere - about 15 points away from a perfect score. Now I do have a mortgage balance, but that is my only outstanding debt.
A "perfect" FICO score is 850, not 615.

But that will become a moot point as they are in the process of completely revamping the scoring system anyway.
post #43 of 51
Having a really high FICO is nice, but it's going to depend on your circumstance in life if you want one or not.

If one is:
1. A home owner.
2. Part of a dual income home.
3. Not actively seeking a new home.
4. And debit free everywhere else.

Please pay your credit cards in full every single month. Also, don't go seeking new lines of credit either. Pay cash for as much as you can. This will cause you to get lower prices for other things in life like insurance.

A high FICO score isn't something that everyone NEEDS in life. Banks want to push it so that it looks like you do, but in some circumstances it just doesn't make sense for the consumer to have one.
post #44 of 51
Quote:
Originally Posted by lunasmom View Post
I read your statement to mean that you rack up $1,000 on one of your credit cards and just make the minimum payments...then if it gets too low (i.e. you only have $50 left to pay) you go back out and rack up another $1,000. If that's the case, that's just wasting your money because of the amount of interest rates your paying.
You completely misinterpreted my statement.

The bottom line is that Susie was asking if it made sense to pay off her cards in full every month.

Heather (Lookingglass) gave Susie the best answer FOR SUSIE'S SITUATION.

I responded by saying that it depends on what your goal is. I'm really tired of repeating myself - After spending a decade on welfare while raising my child and getting two college degrees to better myself, I have spent the last 10 years building up an IRA, a stock portfolio and my credit score. I have done a LOT of reading on the subject, and I have a close friend that is a financial advisor.

Every single person's financial picture and goals are different. Do NOT make assumptions about my personal finances through misinterpretation of my comments.

I am SO done with this thread.
post #45 of 51
Quote:
Originally Posted by pipersjo View Post
Please correct me if I am mistaken, but isn't the perfect score 800?
It might be. When I bought my car a few years back and they ran the report, they gave me the score at the time but the only thing I remember was that it was just shy of perfect. It struck me because they saw my score then asked if I wanted to buy the most expensive car on the lot. It might be in the 800's.
post #46 of 51
Quote:
Originally Posted by GingersMom View Post
Here is the difference: If you want to IMPROVE your credit score or FICO, then you do NOT want to pay off your credit cards in full every month.
That is correct. When we first moved to the US we had no credit score, so spent a little over a year building and building as much as we could.

We did some research and discovered that the best way to build your credit score was to have store cards and credit cards, and pay at least the minimum, but never pay it off. Doing that we got it up into the 700's within about a year and a half.

But, if you have trouble with debt, I would get cards with low limits, don't spend much on them, and pay off the minimums to keep the score up, and use debit cards for bigger purchases.
post #47 of 51
If your able to, pay it off. Out of debt out of danger i say
post #48 of 51
Here's a good link about keeping your FICO score up, or improving it.

http://www.myfico.com/Downloads/File...FS_Booklet.pdf
post #49 of 51
I have also been told it is better to keep some kind of balance on your cards, otherwise there is no sign of how you are able to handle any kind of revolving debt. Yes it shows you have the $$ to pay monthly, but if your circumstances change you have no history of keeping up with minimum on time payments.

If you want to remain debt free and save yourself the money on paying interest, yes pay them off, but if you want to increase your credit score (from what I was told, like Sarah, as a new immigrant) it is best to keep a small revolving balance and have a few but not too many cards to show you can pay them on time.
post #50 of 51
Thread Starter 
Quote:
Originally Posted by icklemiss21 View Post
I have also been told it is better to keep some kind of balance on your cards, otherwise there is no sign of how you are able to handle any kind of revolving debt. Yes it shows you have the $$ to pay monthly, but if your circumstances change you have no history of keeping up with minimum on time payments.

If you want to remain debt free and save yourself the money on paying interest, yes pay them off, but if you want to increase your credit score (from what I was told, like Sarah, as a new immigrant) it is best to keep a small revolving balance and have a few but not too many cards to show you can pay them on time.
That's kind of what I was thinking too Eithne.......I always pay them off every month, but every now and then I'll spread something out over like 3 months just to show them I can pay.
post #51 of 51
I don't know, I paid all my credit card off just recently and my credit is awesome (finally).
Took me forever to get it that way though, thanks to the ex husband (opened cc's in my name when I left him and ran them up.) and some not so good spending habits due to needs after I got the divorce. I learned quickly that you need to get CC's that have the so many months no interest so when you need something you can get it and pay off the balance in the time offered. But you need to actually pay it off in that time so no interest gets tacked on. Since I've started doing that, I've rebuilt my credit to almost spotless. (and I have 3 cc with no balances on them.) Not to shabby for me considering what I went through to get my credit up.
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