credit card "utilization rate"

[Anonymous]

I’m trying to understand how my credit card "utilization rate" could negatively affect my credit score when charging 99% of the credit cards limit and then paying off the entire balance, never carrying a balance.  Is this wise to do?  Or should I still try to keep within that 10-20% utilization ratio even though I always pay in full each month (never carrying a balance).  I’m doing this only to earn as many credit card reward points as possible :-)  

[Uniqua]

The only time it could negatively affect your score is if your util is higher than 9% when your statement posts and is reported to the CRAs.  You can charge 99% of your available CL, but pay that balance down to <10% BEFORE your statement generates. 

[Anonymous]

thanks for the quick reply, but why would I need to pay off the balance BEFORE the statement generates?  whats wrong with receiving the statement in the mail, and then paying off the entire balance within 2-5 days of the statement generating

[Anonymous]

---

@Anonymous wrote:

thanks for the quick reply, but why would I need to pay off the balance BEFORE the statement generates?  whats wrong with receiving the statement in the mail, and then paying off the entire balance within 2-5 days of the statement generating

---

In order to assure that your balance doesn't report and leave you with a 99% util that will tank your scores. If this accidentally happens, it will take a month to recover since most companies update monthly.

[Uniqua]

Because if you use 99% of your available CL and you let that entire balance post on your statement, you will appear to be maxed out, which will most definitely cause a score drop.  Don't forget FICO takes a snap shot of your CR at the time it is pulled.  For FICO scoring purposes, util above 10% is high.   If you are not going to pull your CRs during this time, I wouldn't worry about it; but you stand the risk of having a creditor soft your CR and seeing that high util.  You may or may not receive adverse action because of it.   Therefore, it is best to pay it down before the statement generates. 

[Anonymous]

Okay, thanks!  So two questions here:

1. I’m assuming that credit card companies only release my balance or utilization rate to creditors at statement generation?  and no other time during the statement period?  if so, is this consistent with all credit card companies? amex, visa, etc.
2. You mentioned that “FICO takes a snap shot of your CR at the time it is pulled” so it sounds like this could be done during or in between the statement generation period?  depending on the day I apply for a new credit card or mortgage loan, its live as of that day? 

[Wolf3]

Reporting to Credit Bureaus is not consistent, some do at end of month, some do at statement closing, some skip on occasion, some are late. 

FICO score is a snapshot, so utilization is calcullated live as of that day.    So if you are planning a big appllcation like a mortgage, I would suggest you keep your balances low for a couple of months before hand by pre paying or less charging.  

The rest of the time, you can charge to the limit and pay  before the due date, there is nothing wrong with that.

[Uniqua]

1.  All creditors are not the same.  Some report the statement balance as soon as it is generated while others report the balance on your CC at the end of the month.  You have to know how YOUR particular creditors report to be able to play the util game effectively.

2.  Yes.  Doesn't matter the time or day of the month.  When you, a creditor or a potential creditor pulls your CR, FICO will generate a score based on what is on your CR at that time.  I usually wait about a week after my statement has generated to pull a report.  If you want to see your score rise you have to know how to play the FICO game (util, new credit , AAoA, inquiries, etc.).

[Anonymous]

Thanks for all the info, much appreciated!  I’d like to learn more about “how to play the FICO game”.  Is there are particular starting place?

[Wolf3]

Click on the Education Tab at the top of this page and read credit basics