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Fact v. Fiction on Credit Utilization

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RonM21
Valued Contributor

Re: Fact v. Fiction on Credit Utilization


@Appleman wrote:

Case reports, information from FICO and yes, some educated guessing.

 

The algorithms are protected (we can't see them) and each file is unique, but overall I believe members on this board have a pretty good view of the important trends.


+1 to this

 

I just take it as info coming from experience from users overall.



Total CL: $321.7kUTL: 2%AAoA: 7.0yrsBaddies: 0Other: Lease, Loan, *No Mortgage, All Inq's from Jun '20 Car Shopping

BoA-55k | NFCU-45k | AMEX-42k | DISC-40.6k | PENFED-38.4k | LOWES-35k | ALLIANT-25k | CITI-15.7k | BARCLAYS-15k | CHASE-10k

Message 11 of 16
Kirmie2010
Established Contributor

Re: Fact v. Fiction on Credit Utilization

Educated guesses mostly Smiley Very Happy  And many just re post what thyve read in the past.

 

The never exceeding mid month may matter for an internal score for that specific company's card, but it wouldnt affect the FICO score.

So that is true both ways, it does matter and it doesnt, depending on which card, whether or not they use their own internal scoring model, when they do it and all of that.

 

I base what I say off whats happen to me, the utilization reported to FICO generally does matter, over 30-35% youll start seeing denails with high utilization cited on your denial letter.

Message 12 of 16
delaney1
Established Contributor

Re: Fact v. Fiction on Credit Utilization


@myjourney wrote:

@Anonymous wrote:

I keep seeing so much contradictory info on this topic, I'm starting think know one really knows.   In particular, "Nerd Wallet" says exceeding a 30% credit utilization ratio at any point in a billing cycle on any one of your cards could do damage."  Correct 

 

And many previous posts here firmly state the advice that you should pay your balance the day before due date and then not use it again to after the statement date, Wrong in to many ways I see 4 already .....

 

1) Making a payment the day before will not post to your account in time 

2) payments should be made at least 3 days before to clear 

3) find me a post that says not to use your card until after the statement cuts and that post is also wrong 

4) you can use your card the day before statement cuts because those charges will not post to your account and by default will be credited to next statement 

but that really doesn't make sense to me since cc is just going to report the statement balance that accumulated since the last payment anyway.

Are people just essentially guessing here? You have more research to do ....Lol


We know because Fico shares this info with us just not the algorithms used so no guessing needed 

UTL of more than 30% will ding you scores 

Total UTL over 30% will also ding you 

Total UTL over 30% with one card over 70% will double ding you score wise as that card is seen as being maxed out 

 

Having a thin file may see more of a ding in some case vs a thick file that may see very little change YMMV

 


I haven't found 1,2 or 4 to be true for me. Maybe it depends on the company As to point 1 and 2, just this week, I had my QS set to pay statement balance on the due date 5/2. It posted to my account sometime after midnight on 5/3 with a payment date ofv5/2. The money was removed from my checking account at 8 am on 5/3. For #4, I have a closing date of the 5th for my QS, I charged my daughter's fall tuition payment on the 4th thinking it would be pending for a couple of days. Well, by 11:59 on the 5th my statement hadn't closed. I think it closed around 1or2 am  on the 6th and it captured  that charge from the 4th. I was like, Ugh! Smiley Happy  Go figure  The next month my statement closed before midnite, not sure why my account did that.

Message 13 of 16
NRB525
Super Contributor

Re: Fact v. Fiction on Credit Utilization


@Anonymous wrote:

The problem is that it seems odd that the rating agencies would treat revolving credit that's less than 45 days old the same as it does older credit that persists on a statement.   So when people talk about utiltization, which are they talking about?  

(Or in other words, I can't believe that the reporting agencies actually treat the two types of credit the same--the important one seems the money that you're paying interest on...)


The simple reason is, because there's no way to distinguish the Statement Balance between that portion that is being charged interest, vs that portion that may be PIF. So the Utilization calculation just looks at the reported balance, statement balance in most cases, end of month balance from US Bank, and divides that by the one card and / or all cards revolving limits. If one is carrying a lot of that limit as balances from month to month, they have a higher utilization. Whether they are paying interest isn't reported, and so can't be factored into any scoring.

 

As to the earlier question you had about "paying before statement" what the folks are referring to there is paying the account completely to zero, prior to the due date just before the statement closing date. The intended result is, the Statement Balance, will be zero reported to the CRA. If you just pay the prior statement balance by the due date, then you aren't paying any interest, but then your charges during this recent period will be on the statement and you will report a balance.

 

Now, I'm firmly in the camp that says "meh" to worrying about exceeding 30%, and "why?" to trying to pay cards to zero prior to statement cut. But that's partly a practial result of high balances on cards, and finding ways to minimize interest cost (although I've paid my share of interest in the past), and using that as part of building credit history through actual balances.

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
March 2021 $33k on $312k EQ 796 TU 798 EX 801
May 2021 Paid all Installments and Mortgages, one new Mortgage EQ 761 TY 774 EX 777
April 2022 EQ=811 TU=807 EX=805 - TU VS 3.0 765
Message 14 of 16
SouthJamaica
Mega Contributor

Re: Fact v. Fiction on Credit Utilization


@MrsCHX wrote:

Is the balance reported the statement balance or whatever random number exists on whatever random date they report?

 

e.g., My Capital One payment is due on the 6th. (paid already) My statement is usually dated the 8th/9th.

 

Let's say my balance on the 9th will be, $180. 

 

What in the heck will C.O. report? 


It's the statement balance.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 15 of 16
SouthJamaica
Mega Contributor

Re: Fact v. Fiction on Credit Utilization


@Anonymous wrote:

The problem is that it seems odd that the rating agencies would treat revolving credit that's less than 45 days old the same as it does older credit that persists on a statement.   So when people talk about utiltization, which are they talking about?  

(Or in other words, I can't believe that the reporting agencies actually treat the two types of credit the same--the important one seems the money that you're paying interest on...)


You don't have to believe it for it to be true.

 

There's a lot that's arguably illogical about the FICO algorithms.

 

I could give you a pretty long list of dumb things about them.

 

But if you think something is not so, simply because it's unfair or illogical, you are giving the FICO algorithm too much credit.

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 16 of 16
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