Utilization question

[Anonymous]

Good Day!

I have been stalking this board for months now, and can't find the answer to a question on my mind..

I'm only 25 and have definately messed up my credit in the past, but I can do better in the future for when it really counts. I have a Best Buy rewards Master Card that I charge everything from food and gas to electronics and Christmas presents on. Unfortunately I only a limit of $650. As soon as the statement comes out, that last month's balance is paid in full. But I still need to eat so, I charge the rest.

For example. Last month I spent $300 and in the mean time charged $200 more. I'd pay $300 come paycheck time. Like an earlier post, it also keeps me from paying interest while accruing my Best Buy points.

So the question: Does utilization really mean how much of my credit I use ($500/$650) or how much of the balanced is carried ($0/$630). It'd be really annoying if it's the former because then I'll have to charge only 10% then pretty much make a payment everyday. Thanks much for your help!!

Dinielle

[Peach8321]

When your statement cuts, there will be a "new balance" number...that number is your utilization.  So if your statement says your new balance is $300...then you have a utilization of 46%...quite high.  Sadly, they don't know that we never pay interest, they only know what your balance is on your statement. 

What are your FICO scores?  Perhaps someone here can suggest another card you can add to the mix.  By doing this, you can help decrease your utilization (for example: get a card with a $300 limit...very low but that will decrease a $300 balance to 31% utilization since you'd have 300+650 total credit).

I know that's not positive to hear, but that's how it works...

[Anonymous]

So it would be better if I paid it off before the even statement is even sent. Thankfully I have a couple of other credit cards and some store credits. I have no idea what my FICO score is to tell the truth. One of the to do things is to get my scores, but I've always been afraid to look because there probably isnt anything good to say. This holiday I was able to open a couple store credits (West Elm and Target) so I figure it can't be that bad since I wasn't denied. But I am working on learning to control my money, and more importantly, spending. Since my limits are so low (~$500), am I'm better off using my check card, using my cc's for small purchases to keep them activated, until they will raise my limits?..

Thanks so much for your fast reply!

[MarineVietVet]

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@Anonymous wrote:

So it would be better if I paid it off before the even statement is even sent. Thankfully I have a couple of other credit cards and some store credits. I have no idea what my FICO score is to tell the truth. One of the to do things is to get my scores, but I've always been afraid to look because there probably isnt anything good to say. This holiday I was able to open a couple store credits (West Elm and Target) so I figure it can't be that bad since I wasn't denied. But I am working on learning to control my money, and more importantly, spending. Since my limits are so low (~$500), am I'm better off using my check card, using my cc's for small purchases to keep them activated, until they will raise my limits?..

Thanks so much for your fast reply!

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Welcome to the forums.

If you are looking to optimize your FICO scores:

Optimal credit utilization for FICO scoring purposes seems to be:

Total revolving utilization > 0 and < 9%, the lower the better, and
Reporting a balance on less than half of your revolving TL's, and
Reporting a balance on half or less of all TL's.

If you do decide to check your scores you can only buy true FICO scores at a few places. One place is here at myfico. I suggest you do an internet search for "myfico discount codes" to save a little money. You can also purchase your Equifax score at www.equifax.com and your Transunion score at www.transunioncs.com. No one has been able to pull their own Experian score since mid-February. Creditors can pull Experian and also there is a CU in Pennsylvania that supplies that information to it's members only.

Good luck to you.

[Jazzzy]

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@Anonymous wrote:

So it would be better if I paid it off before the even statement is even sent. Thankfully I have a couple of other credit cards and some store credits. I have no idea what my FICO score is to tell the truth. One of the to do things is to get my scores, but I've always been afraid to look because there probably isnt anything good to say. This holiday I was able to open a couple store credits (West Elm and Target) so I figure it can't be that bad since I wasn't denied. But I am working on learning to control my money, and more importantly, spending. Since my limits are so low (~$500), am I'm better off using my check card, using my cc's for small purchases to keep them activated, until they will raise my limits?..

Thanks so much for your fast reply!

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Hi...yes, in order to maximize your FICO scores, you would be better off to pay your balance before the statement is cut. At our house, we pay online 2-3 days before the statement is cut. Then, if a balance does show, pay it off right away so that you don't accidentally miss a payment due date. It gets a bit tricky at times. Let me add, however, that unless you are on the verge of applying for new credit, it's not necessary to tweak your scores every month. It does take a while for things to report, so if you are thinking of applying for credit, you need to start tweaking a few months in advance. If you read more here on the forums (especially the Credit Card forum), you'll see that there is a belief that out of all your cards, it's good to let a tiny balance show on one card.

If you are disciplined in managing your money, I see no reason to use your check card more. That's a capital "IF" however! We are a family that charges even the piddly little things in order to get cash rewards, airline miles, etc. It sounds as if you like maximizing your Best Buy rewards. That's all good...if you can discipline yourself to NOT spend more just because you are putting it on a credit card. If you feel safer using your check card, then, by all means, that's what you should do. Some people just aren't at a place in their lives where they can manage charging everything and then paying it all off within the month. There's nothing wrong with going at it gradually.

Lastly (and then I promise I'll stop...), I noticed that you said you've gotten a few new store credit cards this holiday season. Keep in mind that whenever you apply for credit, they are doing what is called a "hard inquiry" on your credit report. These count against your FICO score, and if you get too many it can not only lower your score, it can keep other creditors from approving you. Also, new accounts can lower your score as well as your Average Age of Accounts. Many of us do what is called here "credit gardening." That means that after we've applied for and received new credit, we let everything rest and age for a while. It may be time for you to take a step back, figure out where you are on your FICO scores and what's on your reports, and then set goals for other credit you'd eventually like to have. You don't want to end up with a wallet full of only store cards. I don't know if you have a credit card from a major bank, but you'll want your credit to be in good shape if you decide to apply, for example, for a Discover, AmEx, or others. Don't keep getting new credit just because you can. Be conservative and be selective.

Sounds as if you have a good handle on things.