It’s always a hot topic and yet it is still one of the first questions people ask when they talk about owning their credit cards. MyFICO doesn’t hand out their magic formulas and the best you can do is to NOT use it at all if you’re worried about credit. But if you HAVE to use it, try this…
It’s a bit vague, but we do know that points are given or taken away based on the amount of available credit used by a person.
Common senses says that using the maximum amount on your credit card and paying only the minimum each month will likely knock your score down.
Using a large percentage of your available credit each month, even when you pay the bills on time each and every time, can detract points if you are carrying a high balance at the time your credit history is scored.
So it depends on what you’re trying to do with your credit. Are you trying to get a loan?
If so, do you NEED to use the credit cards? If not, leave them alone.
Your FICO score is a trade secret. FICO isn’t going to tell you exactly how it is computated, or else who would pay for their service?
It’s just like cooking for chefs. Nobody gives away their secrets as then why would a restaurant goer visit that chef’s restaurant when they could “eat at Joes”?
What we DO know about MyFICO is that they offer this info in regards to your score:
35%,- punctuality of payment in the past (only includes payments later than 30 days past due)
30% – the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
15% – length of credit history
10% – types of credit used (installment, revolving, consumer finance)
10% – recent search for credit and/or amount of credit obtained recently
Keep in mind that your credit score is a “snapshot” of your credit report on any given day. So, in theory, you could have perfect credit 2 days after you bought 3 new cars and a new kitchen. They snapped the snapshot prior to that, or it hasn’t hit yet. Most lenders report to the credit bureaus every 30 days. If your credit report is scored right BEFORE your monthly credit card bill is due and you’ve used a significant portion of your available credit, your score will likely go down.
On the flip side, if the report is pulled right AFTER your monthly credit bill and you’ve tacked on some new toys, you’ve probably got 30 days to clear it up if you’re looking to stay clean on the debt side of things.