UTI vs. Monthly Balance

[Anonymous]

My second credit  bureau update on one of my secured cards limit $400.   The first month reporting was $0 balance and seen a slight increase, this month I reported with $29 balance for EQ and EX (TU hasn't updated yet) and the FICO increase was between 14-20 points. Should I let a higher balance report next month (while still remaining with low UTI) to see if I get a higher increase for EQ and EX?

[Anonymous]

good question I'm wondering the same what should I do when I recieve my new cards. should I keep a lil balance or keep the balance zero I'm use to paying with cash but looking into leasing and buying a condo in the next 2 yrs so I have to start rebuilding credit I'm with you any advice will help 

[Thomas_Thumb]

When you get a new card, you do want to use it every month for a few months. If it is your only card, you also want to allow a "small" balance to report every month. That does not mean you should or need to "carry a little" balance. It is best to use the card, allow some balance to report and then pay the balance before the due date each month.

OP - You should see highest score if your aggregate utilization (all cards combined) is kept under 9%. If this is your only card, only allow under 9% to report for best results. Feel free to report different balances and test how your profile reacts to changes in utilization. The factor is point in time so what you show today has no impact on future scores.

essienakya33

My 21 yo daughter got her 1st two credit cards in January and is just starting to build credit. Optimizing score is not critical in strict credit building mode. Responsible credit use with solid payment history is what matters. I told her to use her cards and allow balances to report naturally. Just pay balances in full each month and:

1) Keep charges under 50% of each card's respective credit limit

2) Keep aggregate utilization under 30% (balances both cards combined/credit limits both cards combined)

Really no need to report ultra low balances (utilization %) in credit building mode. It adds no value to credit history. Just don't pay late - ever.

Side note - Not paying in full won't hurt you credit history either, as long as you pay minimum amount specified by the due date. The problem is interest charges and potentially developing bad habits.

[Anonymous]

Thanks.  I still have a few questions and trying to grasp this "credit UTI" thingy.  

Example: $400 limit, due date the 24th of every month, statement cuts 27th and reports to CRAs 28th.  Carried a small balance of $29 that reported, will I pay interest on this amount next bill statement or as long as it is paid by the 24th of next month interest won't apply? And you are suggesting to PIF every month during the rebuild phase since UTI doesn't really matter.  Creditors are moreso looking for good payment history.

[Thomas_Thumb]

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@Anonymous wrote:

Thanks.  I still have a few questions and trying to grasp this "credit UTI" thingy.  

Example: $400 limit, due date the 24th of every month, statement cuts 27th and reports to CRAs 28th.  Carried a small balance of $29 that reported, will I pay interest on this amount next bill statement or as long as it is paid by the 24th of next month interest won't apply? And you are suggesting to PIF every month during the rebuild phase since UTI doesn't really matter.  Creditors are moreso looking for good payment history.

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If your statement cuts and shows a $29 balance, that is what should report to the CRAs on the 28th. [utilization 7.25%]. If you then pay the $29 in full by the due date, you won't be charged any interest. 

If you had a balance of $290 and just paid the minimum due (say $30), you won't see a late fee and your account will remain in good standing. However, the carry over balance ($260) will incur an interest payment according to the APR. Also, any new charges may also become subject to interest payments.

[Anonymous]

Thanks for the descriptive reply!