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How does cc uti work?

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Macdoll30
Valued Member

How does cc uti work?

Just got approved for a nfcu card ..$5000. So if I spend $50 of that by the time the statement comes, do I pay the full $50 or pay like $30 and leave $20??? I'm trying to build up my scores so if anyone could shed some light that would be most helpful. Tia
Message 1 of 5
4 REPLIES 4
09Lexie
Moderator Emerita

Re: How does cc uti work?

Util for credit scoring is your overall posted balances divided by credit card limits. Depending on your other cc's will depend on if you should let a balance report and if so, how much.
Message 2 of 5
Walt_K
Senior Contributor

Re: How does cc uti work?

By the time that statement comes, i.e., by the time you receive a bill with a balance, you pay the full $50.  Whatever is reported on your bill is the amount that gets reported to the CRAs (for most cards).

 

If you're trying to control your utilization, you need to make a prepayment before your statement closes, i.e., before your bill is generated.  

 

That said, $50 or $20 is immaterial for a card with a $5000 limit.  In either case you're at or below 1%.  For most people, the ideal utilization is to have $0 report on all cards except one.  On that one card, you let 1%-9% of that card's CL report (that is 1-9% of that card's CL not 1-9% total CL).  After the account reports, i.e., after you receive your bill, you pay the full amount by the due date to avoid paying interest.

 

Remember that this is a general guideline and that there is no memory to your credit score.  This will no "build up" your score.  You could do this month in and month out for a year and your score would be the same if you alternatively maxed out the card for a year and then paid it down to the ideal situation (all else being equal).  Still, there are those who like to get in the habit of keeping their utilization at the ideal point so that they are always ready for any credit applications without having to wait for their reports to update.  But don't sweat it if you miss a month and let more report than you intended. 


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Message 3 of 5
takeshi74
Senior Contributor

Re: How does cc uti work?


@Macdoll30 wrote:
Just got approved for a nfcu card ..$5000. So if I spend $50 of that by the time the statement comes, do I pay the full $50 or pay like $30 and leave $20???

For utilization purposes it really doesn't matter what you pay.  The $50 is already reported when the statement is cut.  Paying it doesn't increase or decrease utilization for that statement period (though it can affect utilization for the next statment period).  To avoid interest, pay in full.  Otherwise you will immediately accrue interest if you carry a balance.

 

As stated above, if you want to reduce reported utilization then you need to pay before the statement end.

 

Is this your only card?

Message 4 of 5
lhcole77
Valued Contributor

Re: How does cc uti work?


@Walt_K wrote:

By the time that statement comes, i.e., by the time you receive a bill with a balance, you pay the full $50.  Whatever is reported on your bill is the amount that gets reported to the CRAs (for most cards).

 

If you're trying to control your utilization, you need to make a prepayment before your statement closes, i.e., before your bill is generated.  

 

That said, $50 or $20 is immaterial for a card with a $5000 limit.  In either case you're at or below 1%.  For most people, the ideal utilization is to have $0 report on all cards except one.  On that one card, you let 1%-9% of that card's CL report (that is 1-9% of that card's CL not 1-9% total CL).  After the account reports, i.e., after you receive your bill, you pay the full amount by the due date to avoid paying interest.

 

Remember that this is a general guideline and that there is no memory to your credit score.  This will no "build up" your score.  You could do this month in and month out for a year and your score would be the same if you alternatively maxed out the card for a year and then paid it down to the ideal situation (all else being equal).  Still, there are those who like to get in the habit of keeping their utilization at the ideal point so that they are always ready for any credit applications without having to wait for their reports to update.  But don't sweat it if you miss a month and let more report than you intended. 


Great explanation!

Message 5 of 5
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