Ask Me Help Desk - Credit card and my credit score

I have always paid my debts in full and on time. I have a credit score near 800. I had to make a purchase of $3900 and used my creidit card. My limit on this card is $20,000. I am paying the amount in full before the due date the end of Sept. Will this large aamount affect my credit score since the balance of $3900 shows on my credit card bill? I have no other bills and only 2 credit cards always paid on time, never amounts over a few hundred dollars , never late in paying. I have a six figure income. I am hoping this does not affect my score. Thanks

Quote:

Originally Posted by citylover

I have always paid my debts in full and on time. I have a credit score near 800. I had to make a purchase of $3900 and used my creidit card. My limit on this card is $20,000. I am paying the amount in full before the due date the end of Sept. Will this large aamount affect my credit score since the balance of $3900 shows on my credit card bill? I have no other bills and only 2 credit cards always paid on time, never amounts over a few hundred dollars , never late in paying. I have a six figure income. I am hoping this does not affect my score. thanks

I never carry cash, use only credit cards, pay them off that same month, don't pay interest.

It's enabled me to have a very high credit score.

I deliberately took out a 6-month payment option (on some new furniture), at the suggestion of my CPA, and paid that off in 5 months, no interest, and that raised my credit score.

JudyKaYTee... with all due respect, I stated in my post that I also do pay my cards in a timely fashion. I never carry a balance over.
I am asking the question... if my big purchase that shows on my bill of $3900 vs my credit limit of $20,000 will in any way affect my score in a negative manner?. also taking a into account my excellent credit history,current score of near 800 and the fact that this $3900 will even be paid prior to the due date on the bill.

I have never had such a large purchase before so I am concerned. I have no knowledge so I am asking. Not because it won't be paid on time, just because the balance (I assume) will show as a "one time high balance" on a credit reoport. I got the bill today. It will be paid tomorrow even though it is due the end of Sept.
Thanks

Citylover,

With all due respect you owe Judy an apology. She DID answer your question by citing her experience. Sometimes the answer is not a simple yes or no.

In this case, the only ones who can answer your question are the people who make up the formula for calculating credit scores. And that's a closely held secret. In my opinion, charging such a large amount since its actually a smaller percentage of your available credit will not have deleterious affect on your credit score. But I can't guarantee it won't. Since youj've already made the purchase, its really too late to worry about it.

I apologize if it sounded like I was offending her. That was not my intention. I was looking for a more definitive reply to my question. Thanks.
Your response has helped.

Quote:

Originally Posted by citylover

I apologize if it sounded like I was offending her. That was not my intention. I was looking for a more definitive reply to my question. thanks.
Your response has helped.

Well, I must admit that I think the "reddie" sounded offensive and intentional.

Maybe someone who works for one of the Credit Bureaus will come along with a better answer for you.

To answer your question directly, as long as the ratio of the balance is under 40% of the available credit limit (which yours is) it should not affect your score or negatively impact your credit. We'll discuss this more in this reply.

I've worked in the Mortgage Industry for several years and by chance, came across information that is VERY VALUABLE. I believe these practices should be taught in EVERY school to every student and should be available to every consumer and citizen, but unfortunately, it is not.

There are so many different views on Credit, but I was told by a friend that worked for one the bureaus that there is a magic formula for building and maintaining credit scores. Your Credit Score is based on algorithms and how they are interpreted and if you don't know how this works, how are you supposed to build up your score?! Well here is what you need to know. These are simple criterea but they need to be follwed to a T to get them to work for you. Here is the Magic Formula:

1. A Mortgage Loan paid perfect (when balance goes under 40% of Loan Amount, this helps even more).

2. (1) Installment Loan, such as a car loan or signature loan from a bank, paid perfect (when balance goes under 40% of Loan Amount, this helps even more)

3. (2) Credit Cards (NOT Debit Cards!), not one, not three or four... 2 Credit Cards! ; paid perfect. Both of these cards need to have low or reasonable credit limits. Again when balance goes under 40% of Credit Limit, this helps even more). They don't have to be major credit cards either. They could be a Home Depot card and a Dillard's card.

Now let's talk about Credit Cards. There are also 2 wives tales regarding credit cards:

1. Most people believe that you need to pay the balance off every month and this helps your credit. If you are trying to raise your score or rebuild credit this is false! The key is to pay the balance down to a dollar or a few dollars and carry that balance over to the next month. Credit Cards are classified on your credit report as Revolving Accounts and if there is not a balance each month, there is nothing reveloving!

Yes, you pay some interest when you do this, but it is pennies and building or maintaining your Credit Score is well worth this minute expense. What the bureaus want to see is payment history. Pay a credit card like this for 12 months and see what happens to your score!

2nd Wives Tale: Having higher Credit Limits on each credit card helps get a better credit score... TOTALLY FALSE! What the bureaus do NOT want to see is your ability to go out and charge up all of your cards to the limit in one day!

Lets say you've had a credit card with a $1000 credit limit for a year and you have been paying the balance down to a couple of dollars every month, like I mentioned above. The card company contacts you and informs you that you can raise your credit limit and asks if you would like to bump it to $10,000? You say yes and the limit gets raised, your Credit Score will actually go down!! Not much, but it will go down some because you now have the ability to go out tomorrow and charge $10,000!

Another example: Let's say you have 4 Revolving Credit Cards each with a few dollars rolling over each month (like mentioned above), but each of them has a $5,000 limit. This means you could go out tomorrow and charge $20,000! OK, today you call each one of them and you request to have your Credit Limit LOWERED to $1500 on each card. Your Credit Score will actually GO UP! Hard to believe, but true.

The other part of this formula is to try to get your existing balances down to 40% of the available limit. Once you hit this threshold, your score will go up. Again, just a little; but you apply each of these practices to helping your credit profile and your overall score will go up quite a bit, especially if you are not doing any of this now!

Hope this helps,

J.P.

Thank-you so much jpbruni. This is very informative and does answer my question. Good tips to know.