How does having a large balance on your card affect your credit?
2010-03-08 at 09:02 pm adminNow, the details:
I just payed for a car partially on my credit card. I put $3500 on my card, which has a $12,000 credit limit. This comes out to almost 30% of the limit. I will have the money to pay it all off in a few days, so at the end of the month I will still be able to pay the balance in full.
Will it still negatively affect my credit simply having that large of a balance, even if I pay it off when the bill comes? Or will this actually help my credit tremendously? I'm a little confused, and see how the answer could go either way…
Answer:If you pay it off quickly it will not affect your score. If you keep your charges under the 30% threshold, then you are doing good as this is the average for most. Once you exceed that and stay at any level above 30% of your debt utilization ratio, then your score is affected.
Enjoy the car.
Answer:Paying the full balance within a billing period should not affect your credit. It would be harmed by a large balance over many billing periods since the credit score is partly based on how much you're in debt vs how much you earn.
As I've recently experienced, a credit card issuer will use the high balance as an excuse to raise the interest rate, leaving you the choice of having unaffordable monthly payments or having your account closed with a balance on it. Either way, your credit is damaged. (They won't be as free to do so after January 1st when the consumer credit card law goes into effect.)
Congratulations on the wise use of your credit card. Keep up the good work!
Answer:not if you pay it before the credit card company reports to the credit agencies. This is usually somewhere near your billing date. If you don't and they report, you will have a higher debt to available credit ratio. That is 30% of your credit score.
Answer:You can use this credit monitoring service to pre-estimate future scores for different scenarios of such payments – buildcredit.ifastnet.com
Answer:Part of your FICO score is based on credit used compared to credit available.
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