Credit Utilization and Reporting Help

[eats_crayons]

Hello,

I have a rewards card that I have been using like a debit card and paying off every month, since it is also 0% interest right now. I figured it was a good way to make a little extra money. Well, it turns out that doing it that way is hurting me because I'm also in the credit rebuilding game so I can purchase a home by Januray. So even though I use it responsibly and never carry a balance, it's hurting my score because it's reporting a high balance and killing my utilization %.

My question is, which date should I pay my cards so that they report a 0 balance? Or a small balance? 

Thanks!

[gdale6]

Pay the statement balance by the due date to avoid interest charges, I would also add the new charges that have posted at this time as well, you want to let 1-9% of only 1 cards CL report to the CRAs. I would also schedule a second payment 1 day before the statement cycle to cover any addl posted charges. Its a good idea to stop using the card 3-4 days in advance of the statement day so all the charges can post and be settled except for the percentage you will let report on this card.

[Blodreina]

Right before the statement closes for most creditors, I think.  Look at your statement dates and make the payment right before that date.

[eats_crayons]

So ignore the due date and pay the full balance+pending charges before the statement end date?

[Blodreina]

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@eats_crayons wrote:

So ignore the due date and pay the full balance+pending charges before the statement end date?

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Right.  You don't necessarily have to pay pending charges if they won't clear by the end of the day:  just the current balance.  For example, Capital One and Discover both post payments on the day you make it - if you pay it before 4pm (or something like that).  If my statement date is 7/15, I would make a payment on that day before 4pm.  When the statement closes and generates, it will report the balance minus the payment you made.  You'll have to decide if you want to try to pay pending charges too.  Generally though, if there are pending charges on the day the statement closes, they will likely post as final transactions for the next cycle.  

[bichonmom]

Actually, people have found that it's better to have *some* balance reporting on one card - approx 9% of the CL. I'm not clear if you only have the one CC, which is what it sounds like. You may need to experiment and let 9% of the CL report on the statement and see how it affects your FICO. And then PIF so zero reports on your CR, and see what that does to your FICO.

Depending on how long you've had the card (at least 6 months?) then I'd try for a CLI. That might also help allow you to let the balance report and PIF by the due date, as you have been, without taking the ding to your FICO.

For example, if your CL is $5k and your monthly balance is $2k, that's going to ding your FICO more than if your CL is $10k and $2k balance reports. 

Keep in mind this really only matters *when* you are appling for credit. Right now the util is reporting high and dinging your FICO. But if you were to PIF the month before you apply for the mortgage, then when they run your credit, it's going to reflect your FICO at that time (with zero util). So between now and then, it really doesn't matter if your statement reports a balance as long as you pay on time.

I'd still probably try for a CLI though. It makes it easier when you don't have to worry about having high util.

[eats_crayons]

So bichonmom, it doesn't matter what my utilization is today if I plan to apply for the mortgage in 6 months? I assumed this, like other factors of the FICO, was an item that was scored over time.

I have 4 cards: 1500/300/400/400 I only get a tank of gas or some groceries on all the smaller limits then pay it off. It's the 1500 that I use regularly. 

[bichonmom]

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@eats_crayons wrote:

So bichonmom, it doesn't matter what my utilization is today if I plan to apply for the mortgage in 6 months? I assumed this, like other factors of the FICO, was an item that was scored over time.

I have 4 cards: 1500/300/400/400 I only get a tank of gas or some groceries on all the smaller limits then pay it off. It's the 1500 that I use regularly. 

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That's right. Occasionally, I've let a balance report on a card and my FICO drops (usually 10-20 pts). The next month, after I PIF before the statement date and it reports a zero bal again, the FICO rebounds. There is no long-term affect for paying the way you are. The only l/t affect is a late pay or other baddie which stays on your CR for 7 yrs.

I'd try for some CLIs if you've had any of the cards over 6 mos, the exception being Cap One. I'm not sure where they stand on CLIs at this point. Do be prepared to take a HP for a CLI request, so you need to be strategic when you ask for a CLI. 

You could ask for a CLI on the $1500 card and then after the new CL reports, try for a CLI on the other cards. When other CCs see a higher CL, they'll be more likely to match it. This is assuming you haven't gotten any CLIs yet. Also, I'm saying this without knowing who the cards are with. That does factor into the decision. Also, better to PIF before asking for a CLI. 

[gdale6]

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@eats_crayons wrote:

So ignore the due date and pay the full balance+pending charges before the statement end date?

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You would not want to ignore a due date, if there was a statement balance you need to pay at least  the minimum due on or before the due date (if there is a min due amount stated).