Applying for a New Credit Card and Credit Utilization Help?

[Anonymous]

Hi,

Over the course of 2016, I've been working on rebuilding my credit. When I began rebuilding, I paid off and closed all my credits (about 8) and only left one open. Little did I realize that closing all those credit cards and not leaving an extra one or two open affected my credit utilization. The one credit card I have open now has a 4K limit that I try to use over $1200. However, the few times I have gone over $1200, and not by much mind you, my credit score gets severely affected. I have worked hard to get my credit score up from 630 to 700, but trying to keep 30% utilization on one credit card is tough.

So my question is, is it a good idea to open a new credit card to help with overall credit utilization? Would doing so drastically affect my credit score, i.e. credit inquiries, the length of credit history on a new card? Or would it be more prudent to see if I could increase my credit limit on the current card I have (which is a Citibank Diamond Preferred)?

I am looking to buy a home in the fall, and I don't want to bring my credit score down.

Thanks

[Anonymous]

---

@Anonymous wrote:

Hi,

The one credit card I have open now has a 4K limit that I try to use over $1200. However, the few times I have gone over $1200, and not by much mind you, my credit score gets severely affected. I have worked hard to get my credit score up from 630 to 700, but trying to keep 30% utilization on one credit card is tough.

So my question is, is it a good idea to open a new credit card to help with overall credit utilization?....

Thanks

---

Can you help us understand better why it is tough to keep the amount that your credit card reports low?  Is it because you have very little money saved and your monthly income is about equal to your expenses?

With a 4k credit limit, you could easily spend $20,000 per month on that one credit card and still keep the amount that it reports very low (e.g. a monthly reported amount of $30).  Ideally you should want it to be reporting in the vicinity of $5 to $350 each month. 

Let us know if it is unclear how to do that.  Any number of us can explain.

Overwhelmingly the best first move is to get your CC debt paid down.

[Anonymous]

Thank you for your reply. 

It has mostly to do with using my CC for business trips (airfare and hotel reservations).  The money I am saving is for a down payment on a house.  As for my monthly income vs. expenses, my income is higher than my expenses.  I do have a personal loan that will be paid off next month.

I would like to understand how with a 4k credit limit, you could easily spend $20,000 per month on that one credit card and still keep the amount that it reports very low?

[Anonymous]

Just make several payments throughout the month.  You can do that through the credit card website (with a checking account attached to it) or through the Billpay feature of a checking account (with your credit card attached to it).

For example, using the latter method, a person could set up a daily recurring payment of $700 to his credit card.  He'd be pushing about 21k into his credit card each month.  Sometime his balance would be negative, which would be ok.

In your case, you could plan to make two payments for sure each month:

     (1) Pay your balance down to $5, three days before the statement prints.

     (2) Pay your balance in full, three days after the statement prints.

Then, if you need to, make 1 payment in between, where you pay it down to $5 again.  Nothing simpler.  You'll end up with a very low balance (probably between $5 and $300) being reported to the credit bureaus every month -- whatever the balance is on the statement.  That will improve your score a decent amount.  Anything over $359 and you will be penalized by FICO.

Is your personal loan your only open installment loan?  If so, you are about to take a score hit when it is paid off.  We can suggest a way to prevent that.

[Anonymous]

Thank you so much! This is great advice, and I will start doing that!  As for the personal loan, yes it is an installment account.  It makes no sense that they would ding you for paying off a loan. It drives me nuts!  I have one payment left before it is paid off, and I would certainly like to know how to prevent getting penalized?

[IncrsCreditScore1]

---

@Anonymous wrote:

Just make several payments throughout the month.  You can do that through the credit card website (with a checking account attached to it) or through the Billpay feature of a checking account (with your credit card attached to it).

For example, using the latter method, a person could set up a daily recurring payment of $700 to his credit card.  He'd be pushing about 21k into his credit card each month.  Sometime his balance would be negative, which would be ok.

In your case, you could plan to make two payments for sure each month:

     (1) Pay your balance down to $5, three days before the statement prints.

     (2) Pay your balance in full, three days after the statement prints.

Then, if you need to, make 1 payment in between, where you pay it down to $5 again.  Nothing simpler.  You'll end up with a very low balance (probably between $5 and $300) being reported to the credit bureaus every month -- whatever the balance is on the statement.  That will improve your score a decent amount.  Anything over $359 and you will be penalized by FICO.

Is your personal loan your only open installment loan?  If so, you are about to take a score hit when it is paid off.  We can suggest a way to prevent that.

---

I understand the logic of what you are advising, CreditGuy.  Just out of curiousity, I tried something similar for the past two months.  The problem is that even though a couple of credit card companies (banks) posted the payment(s) so that $0 was owed before the cut date.  I then made sure not to charge anything.  But the reality was that the two places reported the balance already paid as owing to the credit bureaus.  How does one make challenges to those practices?  It doesn't seem right.  I will test it next month, too. 

[Revelate]

---

@IncrsCreditScore wrote:

---

@Anonymous wrote:

Just make several payments throughout the month.  You can do that through the credit card website (with a checking account attached to it) or through the Billpay feature of a checking account (with your credit card attached to it).

For example, using the latter method, a person could set up a daily recurring payment of $700 to his credit card.  He'd be pushing about 21k into his credit card each month.  Sometime his balance would be negative, which would be ok.

In your case, you could plan to make two payments for sure each month:

     (1) Pay your balance down to $5, three days before the statement prints.

     (2) Pay your balance in full, three days after the statement prints.

Then, if you need to, make 1 payment in between, where you pay it down to $5 again.  Nothing simpler.  You'll end up with a very low balance (probably between $5 and $300) being reported to the credit bureaus every month -- whatever the balance is on the statement.  That will improve your score a decent amount.  Anything over $359 and you will be penalized by FICO.

Is your personal loan your only open installment loan?  If so, you are about to take a score hit when it is paid off.  We can suggest a way to prevent that.

---

I understand the logic of what you are advising, CreditGuy.  Just out of curiousity, I tried something similar for the past two months.  The problem is that even though a couple of credit card companies (banks) posted the payment(s) so that $0 was owed before the cut date.  I then made sure not to charge anything.  But the reality was that the two places reported the balance already paid as owing to the credit bureaus.  How does one make challenges to those practices?  It doesn't seem right.  I will test it next month, too. 

---

The statement date isn't always the bureau reporting date (though it is for most lenders or near, report may happen a few days afterwards).  Some lenders report at the end of the month, and others will do mid-cycle reports occasionally.

There isn't a lot of consistency but what lenders are we talking about and what were the explicit dates involved?  What you describe is statistically irregular to have it happen with two lenders, suggests maybe something else is going on.

[Anonymous]

---

@Anonymous wrote:

Thank you so much! This is great advice, and I will start doing that!  As for the personal loan, yes it is an installment account.  It makes no sense that they would ding you for paying off a loan. It drives me nuts!  I have one payment left before it is paid off, and I would certainly like to know how to prevent getting penalized?

---

Read the first two posts in this thread.  It will explain how FICO 8 handles installment loan debt and why an SS loan, with most but not all of the balance paid off, will give you all of the points you can get in this area.  Be sure you read the second post closely, so that you understand how and why it works.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/m-p/4506756

[Anonymous]

I will review the links you provided.  As for my CC, how do yo determine the "statement print dates  three days prior and after?

[Anonymous]

Sign onto the web portal that Citi gives you for your credit card.

Look up your last six statements.  There will be a statement date on each one.  Write them down.

If all of the dates fall on the exact same day of the month (Jan 14, Dec 14, Nov 14, Oct 14...), you are done.  You now have a method of predicting the exact day that every future statement will print.

More likely, however, is that the statement dates will vary a little bit (Jan 14, Dec 12, Nov 15, Oct 12...).  That will give you a rough sense of when it is.

While you are logged onto Citi, look for the place that tells you the NEXT statement date.  In the example above, it might be Feb 12.  You will have to scout around on the portal till you find the place that tells you this.

If it is Feb 12, then you know when three days after that will be.  Sign onto Citi on Feb 15 and pay your balance in full.  Every time you sign on three days after the statement date, you will be able to find out when the NEXT statement date is.  Once you know that, you will know when three days BEFORE that statement date is.  Always sign on three days before as well -- but this time pay your balance down to $5 rather than paying it off entirely.