Answers on credit scores and federal deposit insurance

I reached into the e-mail bag and took two questions for this week. Keep the questions coming. I love to hear from you.

QHello, Chris, I've been listening to you on the radio and reading your articles for many years and enjoy what you have to say.

I have a question about credit rating reporting and paying off a credit card each month. I rarely use my Visa card but, when I do, it's for a purchase of less than $200, and I pay it off when the bill comes. Recently someone told me that when I do that it shows a zero balance and does not get reported to the credit agencies, therefore it doesn't improve my credit rating.

He said I should only make the minimum payment each month and do that for a few months before paying it off. That method, in turn, would show my card as being active and would improve my credit score. It doesn't make sense to me, but does that method really work, rather than the way I have always done it, by paying the balance each month?

DOUG

AI'm glad you're paying off the bill on time and in full at the end of the month. It's a good personal finance habit. I would keep doing it.

You don't need to carry a balance on your credit card to get a good score. You aren't putting much on your card, so I imagine you aren't coming anywhere near your credit limit. So if you're concerned about doing better on the credit score front, I would simply use your credit card more frequently-- and still pay off the bill in full every month.

"You don't have to live in debt to get a decent score, but you do need to use credit," writes Liz Pulliam Weston in "Your Credit Score'' (now in its fourth edition).

No one really has a single credit score. It fluctuates, usually within a band depending on when the credit report snapshot is taken, when new information is added, and when old information falls off or declines in significance.

The best way to build up a good credit score is to be responsible borrower paying the bill on time (and, I would add, in full).  

QHow safe are CDs in credit unions for amounts over $100,000? 

Is the extension of insurance for up to $250,000 until late 2013 going to be continued?

DIANE

ACertificates of deposit in an amount of $100,000-plus are safe. The maximum insurance limit for both FDIC and its credit union equivalent-- the National Credit Union Share Insurance Fund (NCUSIF)--has been permanently raised to $250,000 per depositor as part of the 2010 Dodd-Frank financial services reform bill.

By the way, depending on the kinds of accounts you have with the credit union, it's easy to have more than $250,000 insured at one institution. You should check and see how well you're covered at the credit union by using the National Credit Union's online insurance calculator at webapps.ncua.gov/ins/calculator.html.

The comparable FDIC calculator is at www.fdic.gov/edie/calculator.html.

Chris Farrell is economics editor for "Marketplace Money." Send your questions to cfarrell@mpr.org.

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