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opita | Does your credit score go up if you overpay your credit cards? |
Lets say you owe $200 on your card and you overpay by $100 so pay $300.
I heard somewhere your credit score goes up, can ayone confirm.
Additional Details
Please don't just say yes, or no.
It was a pretty good source that told me it could, so please explain your answer!! |
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Jaybird
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No, it doesn't. While credit agencies might imply otherwise, credit scores are based on two things: your reliability in making regular monthly payments on or before the dates they fall due; the percentage of profit the account earns the card issuer. In this latter respect card companies reap profits in two ways; firstly from commissions paid by the vendor when accepting payment for goods with your card, secondly by interest charged on the unpaid balance of your account at the end of each month.
The last thing that credit card companies want is for you to have a positive balance on your account, or for you to pay off your account in full at the end of each month. Both limit their income to vendor commissions and deprive them of the more lucrative element of interest.
So the person who scores highest, is the one who runs his card at the credit limit and who regularly, and without default, pays the minimum monthly payment shown on the billing. This maximises annual interest return and makes the card company very happy. By rote, that happiness reflects in your credit rating.
Of course for those that pay off their account each month, the credit card companies have devised all sorts of practices to trap you into paying penalties. If you want more information on how this is done and how to avoid the traps, as well as sound advice on how best to manage credit cards, you might want to do what I have done and that is to subscribe to the following website. It's based in the UK but the advice it gives is universal and what it discloses about the connived theivery of the banking and finance industry, is truly an eye-opener.
http://www.fool.co.uk
Be sure to trawl its archives.
24.03.06: You misread it tevangelista. I never suggested that an account should be run at its limit. Only an idiot or a person who is desperate does that. I merely identified the type of account that scores highest with the CCC's. Bureau scores are based on input from credit sources; but then you know that anyway. Providing there is no history of default, the principles associated with 'High Risk Activity' went out of the window with the advent of balance transfers and other forms of debt trading. In the UK alone, there is a trillion poundsworth of paper on the market, most of it unsecured and much of it being punted around from one owner to another on a daily basis. Times have moved on. |
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☆ Mrs. L ☆
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NO - and what a silly thing to do ... letting the credit card companies have YOUR money with no interest, etc. |
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landoflookbehind
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no. |
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Dr Universe
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it could yes |
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DramaGuy
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No it is not likely to unless you overpay so much that you are establishing a line of credit by doing so. |
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marketingexpert
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No, but carying 30 percent of your credit line as a balance is best for your score. |
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Taura E
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I strongly disagree with something jaybird said....you NEVER want to have your balance right at the credit limit!!! This is considered "high risk activity". Also, be carefull what types of purchases you make, some companies view purchases like utility bills and grocery stores as high risk as well. To answer your question, though. In my experience, paying in full WILL help your credit bureau score, although in some cases it won't help your standing with the credit card company. What's ultimately important, though, is your bureau score - not your standing with the company. I don't believe overpaying has an impact. Good Luck!!! |
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Lisa
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No that is false. |
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Studly
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It would probably have a very small effect on it, based on the combined debt/credit ratio formula they use.
You really would be better off putting that $100 into savings so you can collect interest. |
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captures_sunsets
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Not that I am aware of anyway. |
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3DDD
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Overpaying does not show up but paying early payments and paying more than the scheduled amount does,especially on house and car payments. |
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scooby doo
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Doing that may be a step in that direction but I think that there is more involved to improve your credit score then that. |
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thylawyer
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Actually, you are better off if you pay more than the minimum balance, but not the full balance. And put the extra money in a bank account where it will earn interest. It will not improve your score, but it will impress a potential creditor if you have some savings. And pay on time. |
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researcher2
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Yes ! An extra money you pay towards your credit cards show that you are trustworthy and carry negative balance. This will encourage creditors to approve or increase your credit limit or perhaps get new credit cards offers.
Remember, having more credit cards under score your points. |
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Andizzle
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I don't believe that it would. Its all about paying on time, paying what you owe, and how much you borrow. It would be nice though, wouldn't it? |
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Credit Guru
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It will not improve your score over just paying the balance in full. If you overpay your credit card by $100.00 then all you will have is a $100.00 credit on your account. If you don't "spend" it within the banks time frame then the bank will refund your $100.00.
If your revolving accounts report a zero balance every month then that is the best you can do for your score. In credit scoring terms you have low credit utilization(a good thing) and are considered a good credit risk. Check out www.myfico.com and look in the Credit Education section if you want to learn about FICO credit scores.
Good Luck |
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chiefof nothing
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Actually paying your balance in full every month could hurt.. If your card shows no balance it is just as if there were no activity on the account If you carry a small balance it shows a history of on-time payments and a use without overusing your credit. Also keep your oldest accounts open..Recent account openings weigh against your credit rating. My credit score was lowered because of the number of inquiries..even though majority were credit card offers and not at my request. |
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andy3191
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No. You just have a extra credit of $100 to use on your card before it reaches back to zero if I understand your question correctly. |
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Huh?
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Never heard of this, but if you pay in full and on time, the credit rate (score) would go up for sure. |
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Claire
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No. Your credit rating is calculated based on your credit profile, your profile will show if your account is paid on time, delinquent, past due, defaulted etc. In respect of credit scoring a credit is irrelevant.
Lenders employ their own algorithms to calculate credit scores and sometimes these are weighted AGAINST people who pay their credit card bills in full each month. After all, the credit card companies make money on the interest they charge - if you always pay your bill you're getting their services for free and they don't like that. |
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