Best Buy & Geek Squad Policies

[kroge15]

Hi there,

I am thinking about getting a Best Buy credit card, because it's offering 18 month interest freee payment plans, so that I can buy a washer/dryer. My question is, will only paying the minimum payments every month affect my credit score negatively? Right now I have excellent credit, and I always pay the balance on my credit cards...so I'm worried carrying debt for several months will dent my score.

Does anyone know how this works and give me some advice?

Thanks!

[cr_client]

If it's a no-interest-for-X-months plan, the only negative to your credit would be reflected in an instantaneous balance vs. available credit thing, but as long as you pay off the purchase in full and on time, and don't make any late payments, your credit shouldn't suffer down the road from making minimum payments.

[AaronE]

Approximately 35% of your overall FICO score is due to "utilization" aka the balances you run up in relation to your limit.

If you keep a good utilization the impact of the BBY card will be minimal. Example:

Let's say you get a BBY card with a $3000 limit and put $600 on it with the 18 months promotional financing - that's very good utilization. Now conversely if you were to put $2900 as a balance on a $3000 limit card that could adversely impact your FICO.

Interesting tidbits:

FICO scores don't care about how much you pay monthly to your debt. Just what your balance is in relation to your limit and that you paid the bill on time.

No banks that I know of report that you pay the bill off in full each month (your other cards) most report the statement balance every month. So even if you pay a card off in full every month putting a high balance on it in relation to its limit can still impact you negatively.

[iamfromhouston]

Also if you get the card, paying the min payment each month will not pay off the balance in 18 months. What you need to do is take the total amount and divide by 18 and pay that each month. To be safe I would divide by 17 just to give you a months cushion.

[CrimsonRain]

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iamfromhouston wrote:
Also if you get the card, paying the min payment each month will not pay off the balance in 18 months. What you need to do is take the total amount and divide by 18 and pay that each month. To be safe I would divide by 17 just to give you a months cushion.

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Give this guy a medal. He speaks wisely. Now if every customer that has posted a complaint on these forums about BBY credit card problems would take your advice, I bet my firstborn child that credit card related problems would drop by at least 70%. People need to seriously take responsibility for their own finances.

[iamfromhouston]

Thanks crimson for the comments. It just takes a little common sense. I am not saying everything is always the customers fault, but the majority of the time it is.

[kroge15]

Oh paying it of within 18 months won't be a problem. I ALWAYS make way bigger than the minimum payments. I was mostly just worried about carrying so much debt on my card.

I did end up purchasing about 900$ worth of stuff and my limit was 2040$ - so that's about 44% useage - not great. :-/ But at least I stayed under 50%!

[Walrus Valued Contributor · Accepted solution]

Like Aaron stated, banks report your balance each month to the credit reporting agencies. Usually the bank reports the balance as of a couple days after the credit card's due date. So if you charge a large balance and then pay it off by the due date, the bank is reporting a 'zero' balance every month, and the credit reporting agencies assume you are just carrying large credit limits. This neither positively nor negatively affects your credit rating.

In Aaron's example with balance vs limit however, putting a $2900 balance on a $3,000 limit would not adversely affect your Fair Isaacs *unless* it were the only credit card you had. For example, I have several open lines of credit with no balances on them, and one credit card that carries a monthly balance that is 75-80% of the credit limit. This is not adversely affecting my credit because that balance is less than 25%.of all my open and available lines of credit combined, which is good utilization.

So putting $2900 on a $3,000 limit card is ok, if you have other credit cards and open lines of credit with limits totaling more than $12,000 (with no balances on them).

[cr_client]

Just to confirm that I'm not talking out of my lower hindquarters, can you guys (Aaron_E or Walrus) confirm or deny something for me?

Doesn't the utilization ratio only make a difference if you're actually trying to obtain other financing at the time? For example, if you carry a 90% balance for 2 months straight, but gradually pay it down to a 20% balance when you actually go to apply for a new loan 9 months later, the 90% utilization doesn't make a difference, because the current balance is 20%, yes?

Like I said, that's how it makes sense to me, and that's what my understanding is of the way it works, but I want to make sure that I'm not giving out incorrect information.

[AaronE]

Current utilization is all that matters.

I often rescore credit for my primary occupation and we'll often show revolving debts paid down to impact current utilization.

Past utilization doesn't matter.