How does it work with Unlimited credit cards like Amex?

I just bought a new MacBook Pro, and even though I had the money for it saved up, I put it on my American Express card, just to get some of the protections it offers. I paid it off the next day, as soon as the purchase appeared online.

Sure enough, I got a bill from American Express this month, showing my balance as the full amount. Just to be safe, I logged in and saw that it was, in fact, paid off.

Whether it's intentional, there's just some lag, or I happened to buy that computer on exactly the right day for my bill to be added up, you still have to be careful.

@sleze69: That's a Charge card, not a Credit Card. If it's Charge+Credit then they tell you how much you're allowed to carry over month-to-month.

The statement balance appears on your credit report most of the time, some lenders pick a day (ie: 30th of each month) to send an update to the credit bureaus. American Express is just slow about reporting, it takes them about 30-45 days after the statement date to get the statement balance on the credit report.

Capital One confirmed to me on two separate occasions that if you pay your balance to $0, it will take as much as 90 days to show that $0 balance on your credit report - paying it down to $6 (less than $5 doesn't work!), then paying it down to $0 gets around this if you're concerned about utilization as shown on the credit report. Ridiculous I know...

Why would this be a bad thing, especially if you pay it off every month? At least it shows that you've been using your cards.

@illtron:

It's really helpful to time your big credit purchases for right after the statement date. That way, you are getting an interest free loan for over a month (If you pay it off in full each month).

@SOhp101: It could be considered bad because you may have a higher Credit Utilization Ratio.

The "buy everything on CCs and pay it all off" is my modus operandi, but neither of my cards allows me to pay anything off until the statement is closed and a balance registered.

Is this unusual, or just another of the 8 million variables of CCs?

@zigziggityzoo: So how is a charge card different than a credit card wrt my credit rating?

@sleze69: On a credit report, the Amex's "credit limit" shows up as the highest balance you had at the close of any one month.

My free credit reports just show when an account was opened, whether it is open or closed and that they were never late. For instance:

AMEX
Account Number: 01111111111112.../ Date Opened: 04/1986
Status: Paid,Closed/Never late.

For the open accounts it looks like this:

CHASE
Account Number: 43000000000001......./ Date Opened: 05/1998
Status: Open/Never late.

I pay my accounts in full monthly so there is never a balance. One of my Visa cards recently changed to no fixed credit line, I don't know how that will affect the report.

This concern with a credit score to the degree that people are paying bills twice a month or they are worried that if they do or don't pay their balance in full it will affect their ratio, etc., is overly-obsessive.

If you have good credit and pay your bills on time your credit report and score will reflect that and if you don't pay them on time, your credit report and score will reflect that, too. If you have large outstanding balances, it will reflect that, as well. This is exactly what they are supposed to do.

I am not trying to be dismissive of people who are getting their interest rates jacked because their credit limits have been reduced but people are focussing on the effects rather than the underlying cause of buying things they can't and spending more money than they make. Use credit wisely and you won't have to worry about your score.

If you are in a situation where you are using your credit cards to keep your kids from going hungry then your credit report and score aren't your primary concern.

I think folks worried about a higher credit utilization ratio are probably more so credit geeks than anything. Like people who worry about the tread depth on their car tires, or the cold weather draft insulation on each and every electrical socket in their home, etc, etc, etc...

@zigziggityzoo: Agreed. Like everything else, "it depends". If you have $30,000 in available credit across all your cards, and charge $3K / Month, you're using 10% of your available credit, which isn't too bad. On the other hand, if you charge that same $3K / Month and only have $6K total available credit, you're using half your available credit - which could negatively impact your FICO score.

How to deal with it? (1) get more available credit (but again, double edged sword here: new credit apps and new lines of credit give you a temporary "ding"), or (2) pay off your balance before your statement cuts. Downside here is, you don't get to take advantage the ~45 days of "float" that you get from your credit card's no-interest grace period.

@BeeBoo: To clarify and emphasize:

The underlying problem is people buying things that they can't afford and spending more money than they make.

@zigziggityzoo: That's not necessarily true. The AmEx One card, for instance, carries no pre-set spending limit in many cases but acts every bit as much like a credit card with the ability to carry a balance (although you pay no interest for 30 days after a purchase).

Here's what I do:

Let's say my Chase Freedom reward card's statement cut day is every 8th of the month. I pay down the balance on the 5th or 6th and leave $1. When the statement cuts Chase reports $1 to the credit bureaus. I go online and happily pay the $1.
This way you always show activity and keep your DTC really low!

FICO score does not care what the balance was at the end of the month. As long as you used your card and show activity while staying below 30% utilization. Most in-the-know people will tell you that to get the maximum score, you need to stay below 8%-10% utilization across the board so keep asking for CLI's and GCLI's. $10,000 balance on $100,000 card is still 10% unless you're being manually reviewed...

oh, ok good. SO I have a credit limit of about say 5-7 thousand dollars & only put about $600 tops on it a month. I'm golden?

Just keep in mind if you apply for a mortgage, your underwriter will use the minimum monthly payment that shows on your report. So if you charged $2000, even if it is now paid off, for 2-3 months that account will show you have a monthly payment of $200 (or whatever.) That monthly payment will be used in your qualification ratios.

I have a credit card that gave me 1.99% interest about 2 years ago. It's for the life of the balance so I bought a bunch of stuff I needed and have been paying it off. A couple months I paid just the minimum and my credit report showed the card as "minimum payment". My question is whether paying $1 or $2 over the minimum will trigger a better credit score since I've not paid just the minimum. My FICO is about 770 so it seems okay.

@zigziggityzoo: Except even those often have no correlation to your score if you get reclassified much. My score varies wildly from month to month, over 100 points in at least two instances (one up, one down) over the last year, with 5 of those over 70 points month-to-month.

I've just learned to ignore them because they're bogus. If you're bright enough to not pay interest, you are hopefully bright enough to not need/want a loan.

@johnfrombrooklyn:

On the credit reports you don't have a line for last payment. Usually most will show: Balance, Date Updated, High Balance and Terms (aka min payment) If someone like a creditor does a soft pull on your report every month, they will see your balance decreasing by X dollars every month and comparing that to the min payment can deduct that you're only making the minimum payment but I don't see how or why they would need that.

On the other hand the lender(credit card company) see's this in their records and may see you as high risk borrower since in their eyes you're barely scraping by.

My view: If you are not planning a major purchase anytime soon, Who Cares? Keep doing what you're doing.

@RobinB:

Correct! The min payments are added to you're other debts to determine the DTI (Debt to Income ratio) which is enough to disqualify you from getting a mortgage.

My technique works pretty well. The statement gets rolled out on the 17th, so I go online and pay off my credit cards every month on the 15th and the last day of the month when I get paid. This means that I typically see statements telling me I have a zero balance on the card even though I use it for just about everything (gotten over $200 in rewards this year alone and I'm about 2 weeks away from another $100).
And my FICO? The person handling my mortgage said she'd never seen a score so high on a 28 year old, so apparently it's not hurting.

you just need to have 600 at the time the statement cuts. you can charge whatever you want monthly but the point is to make sure your balance is low when the cc statement is generated (and subsequently reported to the credit reporting agencies)

Is having a $1,000 balance on a credit card going to affect someone's life like keeping them from getting a mortgage or something?

I pay off my credit card a few times throughout the month and always overpay slightly to keep my balance a little negative (and my statements show that). Is this worse or better for my credit score than having my statements show a slightly positive balance? Would this not be seen as "activity?"

Yeah, it shows on your credit report as a balance. But that's a good thing as long as you observe the note about utilization. If you put a $2800 item on a $3000 card and pay in full you'll be taking a heavy score hit for one month due to using most of a card (and more if you don't have other credit on other cards).

Most card companies will give credit limit increases if you are paying in full each month and want to use that much money, provided your financial health/reports are good, and you are not dealing with cards from First Premier or Orchard, or many cards from Capital One.

It is good to have these balances showing, though. No visible use hurts you as the cards eventually stop counting toward your utilization and on manual review the underwriter will be suspicious because you aren't actually using your credit.

@BeeBoo: Aside from any impact to your score (see my reply below) it depends on your income.

@Jester6641: Be careful. If you go too long with a reported $0 balance the card stops counting toward your utilization. You want those balances reporting as long as they are low compared to your credit limits.

@johnfrombrooklyn: Be careful. Depending on the company they may increase your APR for making minimum payments on a balance in the current credit climate. If it is a company like AmEx you should start paying quite a bit more or look for a place to transfer those balances to. With most others, I'd be paying twice the minimum.

@RobinB: Simple solution! The month before you apply for your mortgage, if those balances would be significant, pay well before the statement cuts or use some cash. Afterward, you can return to normal activity.

Also avoid applying for all new credit at least six months before applying for a mortgage.

@forgottenpassword: Yes.

@XianZhuXuande: I typically see $0 on my cards, but it's not uncommon to have one or two show a little bit (under $100) on a given month. I should have said that I never have more than 2 days worth of stuff on there when the billing cycle hits, and it's typical that I didn't buy anything those 2 days.

@econobiker: Depends on how much your FICO score impacts your life. If you make a lot of use of credit cards you need to pay attention to this stuff or you'll get some credit limits decreased or get a default APR (and other companies can follow suit in the first case). It really matters if you're getting a car loan or a mortgage.

@Anks329: And as long as the AmEx card is reporting properly, and without an actual 'credit limit' entry, it won't count toward your utilization anyway (though it matters during a manual review by an underwriter).

Bring up Annualcreditreport.com

I pay off all my credit cards every month, However all 3 big companies make it look as if I always have my credit always in use.

-Now I see why Capital One wants me, they think that I never pay a balance off.

***Wouldn't it be better to do a "Round Robin" between card such as Use your Credit Cards every other month, so that each card would in theory show a 0 balance 6 months out of the year?

@sleze69:

Technically, AmEx is a charge card, but they now have "Pay Over Time" where qualifying purchases can be paid like a regular CC, but at some crazy rate. I think it's 19%.

What happens to your credit score if you call your CC company and request for your credit limit to be raised? I know my credit union has done this for me before when I was planning a large purchase. I'd imagine, given the info in the last post, that requesting a larger credit limit (and then not utilizing it) would raise your credit score...does anyone know if this is true?

And, does the process of requesting a higher limit adversely affect your score, effectively cancelling out any benefit anyway?

@econobiker: Ok, really, I get the reference to the insulation around wall sockets, that's stupid. But tire tread depth? Bald tires can be really bad, especially here in New England, so I wouldn't exactly call myself crazy for worrying when they start to get low in September.
But yes, if your credit is good enough that you're worrying about this, you are probably just a geek. There are more important things in life.

@strife1012: I don't think the "round robin" approach would necessarily work. Assuming you aren't changing your spending habits, then you're still utilizing the same percentage of your available credit, just all on a single card instead of across many.

If anything, it seems to me that you'd want to keep the utilization rate as low as possible across as many as possible.

@summerbee:

Having a larger available credit does nothing to the score. It's you're balance vs. available credit that matters (utilization). Here's what I'm talking about:

You have a $1,000 credit limit with $500 balance which makes it 50% utilization. Now of you're credit limit was $5,000 you're $500 balance is 10%

Due to the current credit climate if you have an AmEx or Citibank cards then yes, there's a chance for a limit decrease, they see their exposure decline and are happy even though this is only a perception.

@Jester6641:

Read my suggestion above. Leave a $1 for reporting.

@BeeBoo: BeeBo is hitting the nail on the head here. It's most important, credit wise, to pay your credit card bills on time, not necessarily paying them in full every month. Paying your cards on time is much more important than paying off the whole balance, credit score wise. Like you say, if you look at your report, the credit bureaus primarily report if you were late on payments... if you carried a balance and paid it off, that will usually help your credit score, not hurt it.

@BeeBoo:

The answer depends on your particular situation. If you make $100,000 and don't have any payments then your DTI is very low, then you can have $20,000 debt and it won't make a difference but if you make $40,000 then you're DTI will be much different.

@BeeBoo: "If you are in a situation where you are using your credit cards to keep your kids from going hungry then your credit report and score aren't your primary concern."

On the contrary, the people living paycheck to paycheck are the ones who benefit the most from stellar credit. They are the ones most impacted by the interest rate on their car loans, mortgages, and bank loans. To them, 50pts on a credit score could mean percentage points on a loan, which can turn into to thousands of lost income on higher rates.

Would a person making $500,000 a year really, truly care about the interest rate on his mortgage? His credit credit cards? I think not.

Is this credit score algorithm non-deterministically insane, or what?

@GothamGal: It's not that simple. Some AMEX cards (Green, Black, etc.) are Charge cards and must be paid in full. Others (Blue, Clear, etc.) are regular credit cards and you can carry a balance at will.

@BeeBoo: Probably not unless you have had late payments or you if are unable to pay more than the minimum.

Debt has a lot of different labels. Home equity is good debt, assuming that you make your payments on time. Car loans are also "good debt." Student loans are neutral debt. Credit card balances can be good debt, if they show that you know how to use credit wisely. Amazingly enough, lines of credit from your bank are almost always "bad debt," if you use them or maintain a balance. The bank is willing to give you a great rate, because they know where you keep your money. But a reliance on "bank credit" is never favorable on a credit report. So, when you're trying to improve your credit score, always make your payments on time and pay off the debt in this order: bank credit, consumer credit, car loans, home loans, student loans. I'd also consider closing/limiting bank credit lines to around $1000, or whatever the maximum amount you want for check protection.

why are people suggesting that the balance be kept below 30% per card when it seems like utilization ratio is based on totals?

which is it? 30% of total credit, or 30% on any given card?