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Valued Member
AQ
Posts: 76
Registered: ‎02-28-2013

High Balance vs Utilization and impact on scoring

I was considering using my newer credit card for a bigger purchase than I would usually make since I have 6 months interest free.  In the past, I haven't gone over 15 or 20% on this card, and have been under 10% on all other cards.  Here's my inquiry:

 

I understand that utilizing 30% or more hurts the score and that it's best to keep it much lower than that.  I also understand this rule of thumb to relate to the monthly balance and that, once the balance is paid down to zero, that previous utilization isn't impacting the score.  But since the credit reports note the highest balance carried on a card at any point, how does this affect the score?  For instance, if I used, say, 60% of my cl on one cc and paid off the balance soon, would that 60%  high balance continue to hurt my score even after the balance is paid down?  I understand this might be the case if I maxed it out, using something closer to 90%, but I don't wish to go that high. 

 

So how does the scoring work for cc limits?  Am I long-term dinged for going over 30%, or does that ding only affect me until I pay off the balance? 

 

Thanks!



Starting Score: TU 641 2/28/13 EQ 640 3/1/13
Current Score: TU663 EQ661
Goal Score: 750 750




Regular Contributor
James82
Posts: 191
Registered: ‎08-23-2013

Re: High Balance vs Utilization and impact on scoring

[ Edited ]

It is my understanding that your score is simply a snap shot of your current credit situation. While a higher balance on a card could potentially lower your score one month, with that balance lowered or paid off your score should recover when the new snap shot is taken. It might not recover exactly the same because other items on your report can affect your score too. It could recover to a higher score too. They do not look at past CC balances, only current.

 

What's the limit on the new card and how much is the purchase?

Starting Score: EQ 574 - 08.28.13
High Score: EQ 714 (10/18/13) EX 686 (1/6/14) TU 664 (1/6/14)
Current Score: EQ 686 - EX ____- TU ____

            
Valued Member
AQ
Posts: 76
Registered: ‎02-28-2013

Re: High Balance vs Utilization and impact on scoring

Thanks for the response, James. 

 

So even though the "high balance" shows up on my credit report, it's not factored into the score (to your understanding)? 

 

The CL is only $1000.  It's my first unsecured card after BK that was discharged a little less than a year ago.  The purchase is between $600 and $700.  I have enough money for it so as to not have to use the cc, but I figured if it won't actually hurt my score (once it's paid off) then perhaps it will make the cc company more likely to give me a greater CLI in the future--the logic being demonstrating that I'm using my card for larger purchases, but still being responsible in paying it off in a timely manner.  I'm pretty much only using ccs for building purposes and had been gardening for six months prior to applying for this one.  As well, I don't make purchases on my ccs that I don't have the money for, so I'm not venturing into debt trouble here.  Just strategizing.



Starting Score: TU 641 2/28/13 EQ 640 3/1/13
Current Score: TU663 EQ661
Goal Score: 750 750




Regular Contributor
James82
Posts: 191
Registered: ‎08-23-2013

Re: High Balance vs Utilization and impact on scoring

No, it will indeed affect your score.

 

It depends on when your CC reports the balance to the CRAs. My Cap 1 is due on the 3rd, statements close on the 6th and then they report the balance around the 10th. If I have $700 on the card when they report to the CRAs then that is the new balance that is used to determine the current credit score. $700 balance on a $1000 CL will drop your score compared to a balance <$100 on a $1000CL. It shouldn't be too drastic and like I said, after you pay the card off and it updates the CRAs back to a low balance your score should recover.

 

You'll be at %70 UTIL which is high but I don't believe it will be considered maxed out. I believe it's over %80 when they start to consider the card maxed out which will drop your score lower. Again, once your balance is paid back down your score will recover.

 

 

Starting Score: EQ 574 - 08.28.13
High Score: EQ 714 (10/18/13) EX 686 (1/6/14) TU 664 (1/6/14)
Current Score: EQ 686 - EX ____- TU ____

            
Valued Member
AQ
Posts: 76
Registered: ‎02-28-2013

Re: High Balance vs Utilization and impact on scoring

Thanks again. 

 

Yeah, I totally get the initial balance dropping my score.  When I look back at all my reports, I can see the "high balance" for all past balances.  Like if i had charged $500, hypothetically, to a cc in December, but paid it off and only charged and paid in full a regular amount like $25/month, it would show my balance as $25, but my "high balance" or "highest balance" (something like that) would still show that old $500.  So long as that old, hypothetical,, $500 isn't dragging me down months after I pay the balance in full, I'm happy.  :smileyhappy:


Thanks again, James.  :smileyhappy:



Starting Score: TU 641 2/28/13 EQ 640 3/1/13
Current Score: TU663 EQ661
Goal Score: 750 750





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