Credit Score and Payment/Balance Timing

Given that your credit score depends highly on your balance to limit ratio, you will want to do some planning before applying for something big like a mortgage or a car loan (although I recommend against getting car loans). In particular, if you do as I do and put most of your purchases on credit cards that you pay off monthly, you will probably want to stop this behavior for a month or two leading up to the mortgage application. This is because of timing issues with your credit report.

First off, companies are always on a delay when it comes to reporting your credit status. When I last looked at my credit report in late January, the status of most of my accounts was current through December. But a couple of my lenders (a couple of credit cards and both of my student loans) were current only through November. These accounts showed the balances from November. So if you want to show 0 balances on your credit report (and thus your credit/limit ratio would be 0, bumping up your score) you would be best advised not to use your credit cards at all for 2 months leading up to your loan application.

Here is a listing of my credit scores for the past year (this tracking of scores up to a year is one of the benefits of my Wamu Card):

Feb 06 731
Mar 06 746
Apr 06 766
May 06 765
Jun 06 772
Jul 06 748
Aug 06 720
Sep 06 760
Oct 06 743
Nov 06 772
Dec 06 766
Jan 07 764

You can see that there's considerable variation. I can't remember what was going on in February, and in August I put an extra $4000 on one of my cards. (It was paid off within 2 months.) But for all other months, the combined balance on my credit cards was always around $3000 (always paid off monthly). I really don't know the reason for most of this variation, so I attribute it to the vagaries of timing. Eliminating all of my credit card usage would probably lead to a much more stable (and slightly higher) credit score. I may start such an experiment soon. If I do, I will be sure to report the results here.