I usually always pay off my credit cards in full and have excellent credit but have been having trouble paying the full balance lately. Is my credit score going to lower if I pay the minimum balance due the next few months?
5 Comments Already
May 20th, 2010 @1:12 pm
Your credit score changes about every 12 months, whether you pay in full or make the minimum payment.
May 20th, 2010 @1:22 pm
Your score won’t lower right away just for paying only the minimums. But over the long haul, it could be affected by how much debt is built as a ratio to your limits. The secret little formula for credit ratings puts about 30% emphasis on your “available credit” or level of debt. Another 10% emphasis is placed on New debts. Nearly 40% of the FICO score will be affected by increasing the debt you carry over.
Contrast that with only 35% emphasis placed on payment history, and you can see that it WILL eventually affect your score down the road.
I would focus on paying them off in Snow-Ball fashion, cutting them up and going to a system of buying with saved-up money instead of someone-else’s money…
May 20th, 2010 @2:11 pm
Your credit score will not lower in the next few months if you pay the minimum monthly payment on time, however you should expect the finance charges to increase. When you make the minimum monthly payment you are paying toward the interest of your card. You are not paying down the principal balance. Paying the minimum means that you will pay more out of your pocket over a longer period of time. You should pay more than the minimum balance due if possible.
May 20th, 2010 @2:40 pm
As long as you pay on time your score will not go down. However your debt utilization ratio (how much you owe compared to your credit line) will not change much due to the smaller payments, hence your score should remain the same.
Also the minimum payment IS NOT just the interest for the month! It include a percentage of the balance and is why the credit card companies recently raised the percentage to calculate the minimum payment.
Hope this helps answer your question
It will not affect your credit score as long as you pay the amount on time.