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Using your credit card each month to increase credit score--


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This is probably about the dumbest thing I will ask on these boards, but here goes anyway :D

I received an Orchard credit card back in December. The only thing that has been charged on it is the $39.00 annual fee by the company. The bill came, I paid the $39.00 15 days early and now it has a $0 balance. Great right? Well--I have read to charge on it a little each month and pay it off which builds your credit score. Years ago before my bankruptcy, I would've been so excited, now I am scared to death! Debt freaks me out. So, my question is (and LNY, I hope you respond to this because you have been so helpful in the past and I respect your opinion) do you charge each month and pay off the entire balance? Only charge up to 30% of the CL? Charge more than the CL and then pay it down over 2 months and then pay the balance in full the 3rd month?

I know this might sound crazy as ever, but I really and truly want to do right this time. I have DEFINITELY learned my lesson and have no desire to go back down that nightmare road of bankruptcy. It was horrid. Anyway, everyone's opinions are greatly appreciated. Thanks:)

Tara :)

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Tara,

Unrelated to your question- I have the same crappy card. That $39 fee really ticks me off. Its the only one I have with an annual fee. And the customer service and limit sucks to boot. But since it is my oldest TL since my BK, I will probably stick with it another year.

To your question- yes, I use each of my cards every month. And I buy things on each card that I was going to purchase anyway, ie. tank of gas, graoceries, plane tickets, etc. Since I have every dime budgeted and spoken for every month, the risk of overspending on my credit cards is a non-factor. Thus, even after my recent financial crisis (two years ago), I feel confident I can manage my many cards.

Here is a good example. I usually spend just a few bucks on each card every month, but last month I went on vacation. I spent 10 days in Santa Monica & LA. I put the hotel on one credit card, put the Christmas gifts on another, put the four rounds of golf on another, put the airport parking on another, and put meals on another. Since I have been planning this trip for months, I had accrued the cash, and could have paid cash, but I still chose to give my cards a workout (plus, it is more secure to carry and use credit cards anyway). The day I got back I paid all of the bills off in full EXCEPT about $10 on each card. Now my balance due is $10 for each card as they report, my utilization is low, I paid no interest, plus it is the kind of usage that will help build a case for raising my limits (not sure about crappy Orchard). And one of my cards give me 1% cash back, so I get a check at the end of the year.

As long as your money is tightly budgeted, using cards monthly is a good thing. As far as I know, FICO likes to see usage, and it helps increase credit limits. You can pay anytime online with Orchard anyway, so use it for something small, then pay in full when you get home if that makes you feel a littl better.

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I agree with you jq26. Every month I use a similiar strategy. Sometimes though I pay the balance in two months. Say 80% the first month and the remainder the second month. For the most part, I pay in full every month. Some cards like to see a balance in order to determine if they will give CLI's etc.

ctnmkp: You sound just like me when I got into CC trouble a few years back. In fact, I only had one CC with a 300 limit for five years. I was quite happy with that. I paid cash for everything. Recently I see that I was not helping myself because I know in the future I want a home and need my scores to rise. So I recently cleaned up some of my credit and opened a few cards. What I would do if I were you, is only charge what you know you can handle at the end of the month. That way, you won't feel like you are in over your head.

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Thank you so much to both of you! Great advice! It's nice to be able to come here and someone understand:).

I have budgeted in 30% of my limit into my budget each month. My CL is $400 and I have $120 budgeted as a payment. I just can't bring myself to charge something--LOL:). My statement pulls on the 17th, so I am going to go shopping for something I would normally use my debit card for (groceries and gas) and do it that way. Bankruptcy sucks and I would rather run through hell with gasoline pants on than go through it again. I definitely learned my lesson!:)

Thanks again!

Tara:D

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I also used to think that keeping a zero balance on all cards and not using them was the way to go. I mean, think about it... isn't the object to show you're not credit-dependent?

YOU'D THINK!!! BUT NOOOOOOO!!!

Use it once a month for a small amount (under $20) and pay it in full. Household cards report at the end of the month regardless of your due date. So make your payment in time for the card to report a zero balance, but also report regular usage/payment activity.

And thanks for the compliment. 8]

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That's not quite correct.

Inactivity on an account doesn't give any indication of how you actually use credit - it's only one part of it - you have credit available, but don't use it. Some say if you show a $0 balance, FICO looks at that as a "negative" because it does not give a clear picture of your credit habits. In most cases, LA DEE DA. A $0 balance each month over 10 or 15 years of positive history is in no way negative.

If you pay your balances off at the end of each month, the only negative connotation that has is with the creditors - you're called a "deadbeat". The one's they want are the people who keep a balance on their cards. They call them "revolvers".

I dare say that's the angle the bank manager was looking at (since their on the issuing end of the credit spectrum).

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Showing a zero balance by paying in full every month is one thing (that's what I like to do), but not using your cards at all doesn't really help you... that's what I've found, anyway. For about 6 months once I stopped using my cards altogether, thinking that would be a good thing, and my score went down.

Maybe they thought I was dead. Definitely a score-killer... LOL

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Household cards report at the end of the month regardless of your due date. So make your payment in time for the card to report a zero balance, but also report regular usage/payment activity.

My Household card apparently just reported today. According to my FICO scorewatch, my score went down by 13 points, because of the high balance reporting. I was planning on paying it down to 30% before the end of the month. I wanted the high balance to report with 30% utilization. So be aware of that because the reporting date may vary from state to state.

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If you have TrueCredit, it has the advantage of telling you on what date each creditor reported (which may be before the CRA actually updated your file). I like that aspect of of TC.

I have 2 Household cards, and although they have different statement and due dates, they both report on the 30th. How long it takes the CRAs to update definitely varies, that's for sure!!

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