06-19-2012 08:41 PM
First, a warm 'Hello!' to all you here. I've been lurking for a few weeks, and I'm quickly gaining tons of valuable info here. Thank you! I have a host of questions, so if you all don't mind, I'll just jump right in with the first one.
About a month ago, I received my Capital One secured credit card. My security deposit was $500, so they granted me a $601 total credit limit. About a week later, I added an additional $400, which raised my total limit to $1,001. I'm currently using the card only to make my monthly car insurance payment, which is $84.45. My utilization is under 9%, and I really don't want to go above that percentage.
I intend on depositing another $1,000, then also using the card to pay my monthly phone bill, which is always around $85.68. The way I see it, with a new credit limit of $2,001 and a total monthly charge of $170.13, my utilization will still be slightly under 9%, and I'm hoping that my higher credit limit will make me look a bit more attractive to future lenders.
But here's my concern... On a percentage basis, my utilization will remain the same on my CR, of course. But will the fact that my spending suddenly doubled hurt my score? Or is utilization all that really matters in this situation?
Thanks for your time.
06-19-2012 08:54 PM
At that level of expenses I would think it would just be utilization. If you had a huge CL like 50k or something and spending 9% on it each month, Im not sure if that would change for lenders on manual review. The FICO score isnt affected by it in either circumstance.
06-19-2012 09:01 PM
yea im sure its simply utilization. even on simulators its the utilization
06-21-2012 04:53 AM
You appear to be on the correct path. Remember the three P's. Pay in full, Pay on time, and Patience. In time your scores will be climbing the mountain.
06-21-2012 05:22 PM
For FICO, it's not how much you spend in a given month, it's what gets reported as your statement balance to the bureaus.
Personally to look attractive to other lenders (since their profitability is based on not only interest charges, but also how much you use the card as they get a portion of the transaction fee for every swipe) I run my entire life through my cards. Barely using a card for two charges a month, isn't very profitable for the lending institution. There's more to future approvals than FICO alone, and you can always pay early or multiple times in a given month to manage your reported balances so FICO likes you too.
06-21-2012 06:05 PM
06-21-2012 06:18 PM
Thanks. That was my original intention... Running everything through the cards, then PIF on each statement date. That is, until I learned about utilization. Sure, I can go online and PIF after each and every purchase, but I'm concerned that my balance might get reported right after a large purchase and right before I pay that balance.
In other words, I spend $250, intending to PIF that night. The issuer just happens to report the balance just after the purchase, and my CR ends up showing a utilization of 13%. In the meantime, my goal is 9% or less. If I knew exactly when my usage gets reported each month, I might be able to pull this off. Or maybe I'm just being too ansl snd/or paranoid?
It's very rare that you get an out-of-cycle update, it almost always is the statement balance that gets reported. All my cards have a due date between the 7th and 10th of each month, so I just hammer the balances by the sixth, let that roll into the statement cycle as zero on all my cards except one (which I use and keep it at minimal utilization) and that covers me for the next month assuming I'm trying to make an application that month... which I very rarely am.
Other than that case where I'm prepping for something, like an impending auto refinance as soon as I get a second paycheck, and my balances update for July, I don't worry about it at all though I tend to still pay early anyway around the same time I'm paying my rent on the first... I just don't micromange it quite the same way and use whatever card is handy instead of running it through one (or a debit card for a week if you're REALLY trying to tweak it, personally I consider this counter-productive but people do wierd things for their FICO).
06-23-2012 05:36 PM
Aside from the FICO consideration, which does not appear to be a substantial issue as the % util would be the same, bottom line is that you are going deeper into debt.
Meanwhile, the $$ you are "investing" to get the higher CL is not available, and more interest is accruing.
The positive view of a potential creditor on a higher CL obtained by securing it is dubious, in my opinion. If they peer to that level, they may view it as not really being use of discretionary credit, but rather use of your own money. If it were an unsecured card, their view might be different.
I personally would not tie up my funds just to build secured CL.
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