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How can I use my new credit card to maximally benefit my credit score? (lemmy.world)

submitted 2 weeks ago* (last edited 2 weeks ago) by cheese_greater@lemmy.world to c/nostupidquestions@lemmy.ca

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for bills, is having it on autopay with the biller superior to using it manually to pay that biller? I prefer to manually manage all that as I have for years but I figure its beneficial to get that on a credit card and just make sure its paid off. I already basically use a bills bank account to do essentially this manually
only purchase what I already have set aside/budgeted for and can payoff before the grace period
anything else?

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[–] pishadoot@sh.itjust.works 3 points 2 weeks ago* (last edited 2 weeks ago)

As another person already said, the guy you're replying to doesn't know what they're talking about. But what they're saying is a common misconception, and I'll explain why.

-depending on your billing cycle, at some point in the month the credit card company will do two things on the same day: 1) generate a billing statement for you with the amount you owe and due date and all that 2) report how much you OWE THAT DAY and also WHETHER YOU PAID YOUR LAST MONTH'S CHARGES to the credit bureaus.

-for 2), it is a snapshot in time. If you've charged $500 throughout the cycle, what is REPORTED to the bureaus is that you have $500 charged, which shows you're using your card.

You can come in the very next day, pay off ALL $500 and pay NO INTEREST and your credit score goes up. You DO NOT NEED TO CARRY A BALANCE and pay interest (bad) because your usage is only reported once a month, not day by day.

So, people conflate using a card at all (which you should do in order to build a good credit history) with carrying a balance, because they don't understand how their information is reported.

So:

-get a card

-use it to pay for stuff you already were going to buy

-try not to charge more than 40% of your credit limit on the card

-pay it off IN FULL every month

-profit (literally - as your credit gets better you'll have access to cards with better rewards and benefits)