08-23-2012 07:04 PM
If you are paying in full, your utilization probably won't really be that high anyway. If it is, you need to just work on raising limits and/or get a charge card.
For those who have what I call micro limits on their cards ($200-$500), I think it matters a fair bit to keep on top of your payments and to manage the utilization. People with higher CL don't have as much to worry about but I would still suggest that keeping your utilization low is just part of developing good spending and paying habits. I agree with the idea of working on raising your CL especially those with low limit secured cards. For some, it may be worthwhile to pay on a weekly basis to keep their utilization down while they are seeking additional credit.
08-23-2012 07:38 PM
I respectfully, but vehemently disagree with Koop10010. This has not been true of my experience in helping my fiance and brother improve their scores. And another user above pointed out this exact scenario severely impacted his scores. And if you have a CL of $1000, charge $500 every month and pay in full every month, the utilization for the account will always be 50% (unless the payment is credited before the account reports which is not typically the case for payments made after the statement drops). It is great that you haven't had to pay attention to utilization, many others have not found this to be the case.
There are certain generalizations that are true for everyone, but I don't feel this is one of them. There are other rules that can improve FICO scores, but within the proper context. FICO scoring's impact is determined by the interrelationship between other rules or factors in each person's credit report. Open an account, and it may raise or drop one's scores depending on other info in their CR. FICO measures many factors to determine the direction of scores after a certain event or usage pattern. The direction and amount of movement from a particular action is dependent on interrelated factors found within a credit report. So what is true for one person, might not be true for another.
08-23-2012 09:50 PM - edited 08-23-2012 09:52 PM
I figured some might disagree with me. One thing I should note is that I have no negatives on my credit reports at all. For those who have great established credit or are establishing credit, I definitely stand by what I said: don't worry about utilization. If you have great established credit, you really ought to have limits that prevent you from getting too high anyway. And worrying about hitting 10 or 20 percent utilization is just a waste of time, it just won't matter enough to worry about. For those who are establishing credit, when you get that first card with the $500 limit, go ahead and max that card out for the first few months. I did and Capitol One sent me a "pre-approval" then approved me 3 months later, with just that one maxed out card and 2 pay-in-full payments. Then I kept using those heavily for another 5 months until Amex "pre-approved" me for a Gold. So I applied for that, with 8 months total history with 2 cards that always had high balances (my utilization was atleast 50%) and was instantly approved. My utilization was never high again though, as I used the Amex for almost everything for the next 2 years. I honestly don't think my high utilization scared potential lenders, but made them want my business because I'd use their cards.
For those who are rebuilding and have negatives on their reports, then I start to understand worrying about utilization when you are going to be seeking credit. In these situations utilization can definitely make a difference in your score and can scare lenders. Still, if you aren't going to be seeking credit in the next month or so, why worry? Utilization has no memory in your score. Just pay by the due date like 99% of credit card users do anyway and then when you are going to be applying, pay everything by the statement date. It's not something you need to worry about every month. It's establishing positive payment history and aging accounts that you need to worry about, because those can't be easily manipulated to raise your score whenever you need to.
08-24-2012 05:30 AM - edited 08-24-2012 05:31 AM
... if you have a CL of $1000, charge $500 every month and pay in full every month, the utilization for the account will always be 50% (unless the payment is credited before the account reports which is not typically the case for payments made after the statement drops).
Actually, in my case, my payments were credited before the balance was reported to the bureaus. The problem was the NEW charges. I would rack up X amount of charges, get a statement, and pay in full. Then a new statement would be generated showing the credit of my payment, and the new charges that had appeared since the last statement. What would get reported as my balance was those new charges (which, as you point out, would result in 50% utlization in your example, even when PIF).
For those who are rebuilding and have negatives on their reports, then I start to understand worrying about utilization when you are going to be seeking credit. In these situations utilization can definitely make a difference in your score and can scare lenders.
I had no negatives on my report, and an AAoA of over 13 years. The ONLY negative factor on my report was utilization, because I only had one CC with a relatively low limit. Specifically pre-paying that account to get the utilization under 10% instantly boosted my FICO by over 50 points. But I agree that there's no need to continually worry about it. The only reason I did was because I was apping for some relatively tough cards (Penfed, BCP). Now that I have them, I will go back to simply paying my balance in full when the statement is due. Although at this point, utilization shouldn't be an issue anyway... getting approved for the new cards has raised my total CL by a factor of about 20.