Credit question

I have excellent credit and I've always paid it off in full each month.

I think if you leave $1 on the bill, you will pay the 'minimum' finance charge on the next bill, and I think the interest on your charges through this month will be adding up..... I think...

Anyone on here know if your current monthly purchases are clocking up interest from the moment you make the charge, or do you get interest free until the billing statement comes on new purchases if you carry a balance?

I don't see how you'll come out ahead if you don't pay it all off.

 

We pay off every month also. I have heard on the TV that if you leave any balance you are charged interest on the full amount that was on that' s month bill, even if it would only be $1.00 you are leaving.

 

<div class='quotetop'>QUOTE(daronspicher @ Mar 27 2007, 01:16 PM) [snapback]413031[/snapback]</div>

I usually charge stuff. But I always pay in full except one time.

It seems like when I made a good chunk of a payment on a charge of over $500 when the bill first came due.

I figured that I would pay the bill off in two months plus whatever interest owed.

So when the 2nd month's bill came I paid, (or so I thought I paid) it all off, including the interest.

But then the third month came and it should have been a zero balance but it wasn't, so I was hit with interest again. Figure that one out!

I guess Tom is right in the post prior to mine, and so that is more than likely what happened to me.

No wonder people who don't pay it all off in one month CAN'T get OUT of DEBT!

Then before long if you miss a payment, you are hit with late fees, plus a whole bunch of other stuff!!!!!!

 

i rarely carry a balance unless in dire need and i've got a great credit score. funny, i watch it go UP when i pay off at the end of each month and DOWN when i leave any kind of balance on it...

 

<div class='quotetop'>QUOTE(daronspicher @ Mar 27 2007, 02:16 PM) [snapback]413031[/snapback]</div>

I think interest doesn't accrue until the next pay cycle.

I never did understand credit scores. I've heard that you shouldn't pay off all of your balances suddenly or your score will drop. On the other hand, you shouldn't be maxed out on your credit balances or it will impair your score. I also heard that you shouldn't close credit accounts even if you don't use them. You should also not open up a lot of diverse type credit accounts if you're not going to borrow on them or your score will drop. I tend to not worry about all of this and pay of what I can, when I can. I'd rather not be financing debt if I don't have to. Ignoring all advice about how to beef up my score, I'm still around 700 by just applying prompt payment practices.

Anyone can order copies of their credit reports free on an annual basis. They make you pay to get your fico score, however. You can obtain copies of your report from the three main personal credit reporting companies.

https://www.annualcreditreport.com/cra/index.jsp

 

I have a FICO score of 819.

I always pay credit cards in full and on time.

I paid (past tense) my mortgage when it was due and paid it off 3 years early.

I usually pay auto loans off a year early.

I don't have a clue what your bank officer it talking about. (I think he is BSing you)

~S

 

kettledrum, your bank rep is a seriously misinformed person.

This is how credit card interest usually works:

It is the last day of your billing cycle

Did you pay your current and your last bill in FULL - if yes, no interest charges

Did you pay your current bill in full but not your last month's bill in full - if correct, you will be charged interest on the daily average account balance up until the day you paid the current month's bill in full

Did you not pay your current bill in full - if correct, you are charged interest on the daily average balance of the entire month.

This means several things,
If you are carrying a balance, paying your bill early will lower the interest you are charged because your daily average account balance is less than if you paid at the last minute.

You need to pay in full for two months after carrying a balance before you get a bill without interest charges (this sounds weird, but you are charged interest until the day you pay off your balance). So if you pay off your bill one month and charge nothing to the card, you will still pay interest on the next bill for the balance you had before you paid it off. This seems to be loveit's situation. This is also why when you pay off your Prius before the time is up, there is the special button that tells you how much to pay and by when. They need to account for the interest during the current month, if you pay off the current BILL, it won't have the current month's interest accrued on it, and it will be seen on your next bill, even though you though it was paid off.

Therefore, never leave a dollar on your credit card, your credit company will treat you as though you carry a balance and you will pay interest on the daily average account balance, not just that dollar. Unless, there is a special thing where the credit card doesn't treat the dollar as real money??

As for the credit score - all I know is the FICO score even though the credit companies make up their own scores (which can be a lot differnent than your bonafide FICO score which is used by your lender). FICO does not make any difference as to whether you pay in full or not. As long as you pay the minimum on time, it all registers the same. However, a large part of your score takes into account the balance on your credit cards - and the information is not the most up to date, usually it is the balance on your last bill. So if you owe 6000 dollars one month, pay off your cards in full, it probably shows on your credit reports that your balance is 6000 dollars even though it might be zero today - and this lowers your FICO score.

My FICO is about 740, mostly because I am young and my credit history is only a few years old, and I carry about 5000 dollars in balances at a fixed lifetime 2.9% interest rate on my AmEx card that I won't pay off as long as I get over 5% interest in my HSBConline account. I got 14000 dollars in debt after my wife and I moved to Minneapolis after college graduation even though she didn't have a job and I didn't start grad school for five months. Two years later and even with her entry level job and my grad school research salary, we paid off 9,000 dollars in credit cards, put 4,000 dollars in the bank, and pay her part of graduate school that her company doesn't reimburse us for. It has been a tough few years, but debt freedom is at the end of the tunnel...

So, don't leave a balance if you don't want charged interest, and paying off your credit card in full does NOT affect your credit score, though having a low balance helps it and a high balance hurts it.

 

<div class='quotetop'>QUOTE(SSimon @ Mar 27 2007, 01:35 PM) [snapback]413046[/snapback]</div>

Paying off your balances suddenly can only help your FICO score, not hurt it. Maxing out your credit balances will impair your score (and quite a bit). Closing accounts CAN hurt your score; when you close a credit card account, all of that history is no longer calculated in your score, so all of those on time payments aren't counted anymore. Also, a part of your credit score is the length of credit history, which is averaged somehow to where if you close a card you have had for a long time, your credit history will shorten, and that will hurt your score somewhat (it is only a small part of the overall score). Another part of your score is having a diversity of accounts, i.e. it is good to have relvolving accounts like credits cards and fixed payment accounts like student loans, car loans, or mortgage payments. It is a small amount of your score, but having more than one type of account in good standing helps.

Everyone should obtain your yearly free credit reports each year. I recommend that you get one report every 4 months and check for errors and of course identity theft. My wife had an error on one of her reports simply because the credit card company failed to notify the credit companies that it was paid off when the account was closed, making it a delinquency (the error lowered her score 50 points). Also, I recommend that you don't pay for a credit score unless it tells you that it is a FICO score. Each credit bureau has made up its own scores and if it doesn't say FICO, it is probably thier in house score - which is different and practically useless. Almost all lenders use FICO scores still and it is the only thing that matters (note: your FICO score can vary between credit agencies if the credit agencies have different information). Also, please don't get duped into a credit monitoring service. Unless your obsessive compulsive, you don't need to check your report and score every day, or every week, or even every month. You just need to do it a few times a year and the free annual credit report makes that possible for free. Finally, don't worry about your FICO scores until you are ready to take a loan. They don't mean anything to anyone unless you are shopping for a new credit card or are about to get a loan, and then it is only good in the sense that you have proof that you are in good credit standing just in case your loan provider tries to tell you otherwise. I once used my score to leverage lower APRs on my credit cards, when the credit cards knew that I knew my credit score, they were forced into being more competitive.

 

The basic point of the credit score is allowing a bank to determine, "If I loan this person money, how likely are they to pay it back?" If you never go into any debt, then the bank is unable to evaluate how good you are at paying money back (so you may have a low credit score). Now, I might argue that if you have never been in debt, you are pretty good at handling money, but I'm not not the one that makes the rules.

That said, I don't think leaving a $1 balance will improve your credit scores. I think that just by having the credit card accounts and not becoming deliquent is the important thing.

All of this credit score stuff seems like black magic to me. I can't decide if it's because it's purposely obfuscated or if I'm just not that smart

EDIT: Oooo! I love Wikipedia. See here. While that doesn't exactly answer the question, it at least gives me a better idea of how the thing works.

 

Don't try to play the system or 'fake' anyone out.

Just do the sensible things we know to be benefical to our finances, and let the credit score take care of itself.

Pay off the cards. Save 10-30% of your paycheck. Develop an balanced portfolio. Don't buy stuff which you don't need/can't afford...all the obvious, boring, low-risk things which most of us seem to forget.

IMHO, the idea is to be sound financially, not snake one's way into a higher credit rating.

 

<div class='quotetop'>QUOTE(Pinto Girl @ Mar 27 2007, 06:57 PM) [snapback]413202[/snapback]</div>

So true. I have someone very close to me that's on the verge of bankruptcy, yet their credit score is around 80 points higher than mine. I'd rather retain my overall financial position than be in hers and have the higher score.