Credit Advice

There are too many variables to give a simple yes/no answer. If you consolidate your debt, your debt to income ratio stays the same to that wont nesessaraly help your score. If you keep the accounts open and there is no fee's, (no interest charged, no annual/montly 'membership' fees) then there is no cost to you, the longevity of the accounts will help, and you wont be required to remember to make timely payments. (if 0 balance, then 0 payments needed!) Longevity of accoutns does help credit scores.

Be carefull settling debts, often card companies will offer lower amounts than due to close/write off an account which may seem like an immediate benifit, but in the long term, may cost you significantly in the form of credit dings and then higher interest rates later . If the dollar amount is substancial, it may be benificial to you. However when companies 'settle', they ding your credit report with a "bad debt/acct written off" or "sent to collections"  mark which will significantly impact your score in a negative way. When settling, ask and make certian of how they will report the account to the bureaus. Negotiate with them, they may be able to report 'closed-payed infull' perhaps for a higher settlement?

It is best to use all of your credit cards at least once per month and pay off 100% of the balance.  This will greatly help your credit score and cost you nothing in interest.  If you have 4 credit cards, then  use a different one each time you fill up your car with gas.  I followed this method and it always helped my score.  On my report it says paying as agreed and payed more than the minimum.....since I always payoff 100%.  A good rule to follow is do not use the card unless you have the money in the bank, at the time you use the card.  That way when the bill comes due, you will always be able to pay it off.

I use one credit card to charge everything and the monthly balance can be as high as $4000 but

I pay in full based on due date. The 4000 is about 20% of my limit of 20000.  I think this is hurting my credit score. Can you comment and if it is to what extent ?

JerryB, If I understand your response, you are NOT correct and are misleading!! Leaving any balance on the card is not required! The credit company only sees the balance that is on the account when the statement comes out each month. You should pay it all off before the due date to avoid any interest. The next statement period will then show the new purchases that were made. You should not have a balance to carry over from each month to avoid all interest. In addition, using up to your credit limit each month appears to the credit company that you are maxed out, even if you pay it off every month.

He's not implying it from a financial standpoint. Yes, it IS best to not owe money on your credit cards. From a credit score standpoint, (go check out the credit report card section on CK) your credit score gets lowered significanly if it shows that you owe zero dollars on your accounts. Having a $5 balance isn't going to kill anyone financially with the interest, and according to THIS SITES postings having a 1% balance on your credit card is miles better than having a 0% balance. I'm not a creditor by any means, but I did notice that myself and haven't been completely paying my CC's off each month because of it. Again, having a $5 balance isn't going to kill anyone in interest.

Please take into consideration that credit card companies use average daily balance. I.e., if you leave $5 on your card, they will use you last month's average daily balance (and not $5) to charge interest from you.

dees-

I suspected that the balance reported to the credit bureaus was the monthly closing balance as reported on the statement. In an effort to manage utilization, I sometimes submit a payment before the closing date so the balance report maintains acceptable utilization ratios. Think it works ?

Jfarnsley, 

While you are right that you should always pay more then the minimum payment, the best strategy to build credit is to pay your entire balance every month once you get your statement before the due date.  This way it shows you have utilized your card, and have made a on time payment for that month.  The next month you can make new purchases on the card, and do the same thing.  This way you don't pay any interests(finance charges). If  you have a $200 credit limit then a balance of $138 is way too much.  This amounts to 69% credit card utilization which would have a negative impact on your score.  You should notice your score increasing once you get your balance lower. It is best to stay below 10% credit card utilization.  The higher your credit card utilization the more negative impact it will have on your score.  Once you had your card for about 6 months or 1 year you may want to try to get a credit limit increase.  As far as the anual fee.  If they applied it for the first year when you got your card then it is already part of your balance. If it is not showing up then you may want to check to see if they apply it the first year or if it is waived the first year. It is only charged once a year so if they already charged it then you don't need to worry about it until next year.  The anual percentage rate(APR) is the amount of interest that they charge per year.  To get your monthly finance charge you would divide it by 12 and apply it to any balance that was carried over from the previous month.  Again, if you pay off your balance for the current month every month, and don't carry a balance over to the next month  then you don't have to worry about being charged a finance charge.  The biggest things to remember when building your credit is to never be late on a payment, don't charge more then you can actually afford, don't let any bills go to collection including hospital bills, don't close your oldest line of credit.  I'm trying to rebuild my credit to so I know how touch that it can be.  

Thannk you for that information. I will go ahead a pay off the balance that I have now with capital one and then next month I will do the same. With a credit limit of 200, what is a good amount to spend each month without exceeding the cc untilization?

Ideally you should not exceed 30% of your available credit limit.  With your limit of $200 the best thing you can do is:

-Limit your charges to a maximum of $60 each month.

-Pay the balance off in full each month.