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Member
Posts: 22
Registered: ‎03-15-2017
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What actually is the "sweet spot"?

[ Edited ]

I just received my first credit card. After seeing my siblings and family struggle and have to deal with bad credit, I decided I'll be nothing like them.  I'm not much of a spender anyway.

I don't know any credit analysts and have gotten a few answers in person and online, so I decided to come here.

I've heard that 30% of your credit line is the sweet spot for optimal credit. I've also heard that 25% is. I want the best credit possible as soon as possible. What really is the sweet spot for optimal credit?

Established Contributor
Posts: 1,014
Registered: ‎04-14-2016

Re: What actually is the "sweet spot"?


Taggerung wrote:

I just received my first credit card. After seeing my siblings and family struggle and have to deal with bad credit, I deciced I'll be nothing like them.  I'm not much of a spended anyway.

I don't know any credit analysts and have gotten a few answers in person and online, so I deciced to come here.

I've heard that 30% of your credit line is the sweet spot for optimal credit. I've also heard that 25% is. I want the best credit possible as soon as possible. What really is the sweet spot for optimal credit?


Minimum 3 revolving lines and 1 installment line

 

Less than half your revolving lines should report a balance

 

You want to show <9% utilization on the line or lines that do report a balance for total optimization.

Senior Contributor
Posts: 6,379
Registered: ‎04-11-2016

Re: What actually is the "sweet spot"?

Hello and welcome to the forum!

 

If you are talking about percentage of your credit limit being reported monthly (utilization) without question 25%-30% is far too high.  You want single-digit utilization to report, that is, 1%-9%.  This doesn't mean you can't USE more than that; you can use your entire credit limit in a cycle if you desire (even more if you make multiple payments) but when it comes to paying your bill you want to PIF (pay in full) and never let a balance of more than 1%-9% report. 

 

What is the credit limit of your first credit card?  Take that limit and multiply it by 9% and you only want a balance to report that's below that number.  As a best practice, though, you'll want to get in a habit of paying in full and only allowing a small balance to report... say $5-$10.  That will be the best thing for your credit scores with the presence of only 1 credit card.  Ideally you'll want to work up to 3 credit cards eventually as with 3 you'll be able to maximize your points from the utilization sector of FICO scoring.

Established Contributor
Posts: 1,014
Registered: ‎04-14-2016

Re: What actually is the "sweet spot"?


BrutalBodyShots wrote:

Hello and welcome to the forum!

 

If you are talking about percentage of your credit limit being reported monthly (utilization) without question 25%-30% is far too high.  You want single-digit utilization to report, that is, 1%-9%.  This doesn't mean you can't USE more than that; you can use your entire credit limit in a cycle if you desire (even more if you make multiple payments) but when it comes to paying your bill you want to PIF (pay in full) and never let a balance of more than 1%-9% report. 

 

What is the credit limit of your first credit card?  Take that limit and multiply it by 9% and you only want a balance to report that's below that number.  As a best practice, though, you'll want to get in a habit of paying in full and only allowing a small balance to report... say $5-$10.  That will be the best thing for your credit scores with the presence of only 1 credit card.  Ideally you'll want to work up to 3 credit cards eventually as with 3 you'll be able to maximize your points from the utilization sector of FICO scoring.


+1

 

One of the easiest ways to implement this method is with a 2-payment system.  Not that you can't make more than 2 payments, but at a minimum I would recommend the following:

 

1. On your statement due date, pay your balance down to <9% of your limit

2. On receipt of your statement (or even before, as long as you do this after the statement cuts), pay the statement balance

3. Repeat the cycle each and every month

 

This will give you maximum flexibility, as well as ensure you never miss a payment

 

Have fun!

Member
Posts: 22
Registered: ‎03-15-2017
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Re: What actually is the "sweet spot"?

Thank you for replying!

To be perfectly honest, I am so confused about the utilization. Just because a banker told me 33%, a man on creditcards.com (http://www.creditcards.com/credit-card-news/credit-utilization-30-percent-rule-myth-1586.php) says 25%, you say 9%, some people say 20%, and so much more. This site says the 30% is a myth (http://www.creditscoring.com/myths/utilization-ratio/fair-isaac.html). It seems like it's 100% subjective. :/ But there must be objectivity in it somewhere. 

I have $750 credit line. I don't truly even need a credit card. I always pay everything with my debit card and I'm normally fine. I just need to build credit and build it fast. I'll graduate with my IE degree in 2019 and I need to have good credit for an engineering job. :/

 

I guess the truth would lie with the people who invented the new scoring or the people with 800+ scores.

 

Member
Posts: 22
Registered: ‎03-15-2017
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Re: What actually is the "sweet spot"?

Just curious, but where do you guys get the 9% utilization?

My credit card is literally brand new. Haven't even had to make a payment on it. I stupidly payed off my car in cash...

Member
Posts: 22
Registered: ‎03-15-2017
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Re: What actually is the "sweet spot"?

I'll be honest, I didn't even know you could make multiple payments.

 

Is this more of a good habit or will help build good credit? I do understand the synonymity, but honestly I just need to build good credit as quickly as possible.

I really don't even need a credit card. I've payed for every major purchase myself since 17. But I've either done it on a payment plan without credit history or payed it in cash.

Established Contributor
Posts: 764
Registered: ‎02-23-2017
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Re: What actually is the "sweet spot"?

[ Edited ]

Less than 9% optimizes your score. So if you're looking for a "sweet spot," that number would be it.

 

Less than 30% isn't quite as good for your score, but it seems that when lenders see that number, they consider you to be responsible with your credit.

 

 

Contributor
Posts: 122
Registered: ‎11-19-2016
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Re: What actually is the "sweet spot"?

9% is a FICO scoring step. Get below it and receive points.

 

Now just to clarify, we're talking LESS THAN 9%. You don't have to go racking up dollars to hit a certain number. You could charge only a couple of bucks a month if you want to. It doesn't sound like you really need the use of a credit card so you can just use it as a credit scoring tool. The easiest way to do this is to take a recurring charge that you already have, pass it through the credit card, then pay the credit card in full via auto-pay. If you don't have any recurring charges, use it for gas or food but try to keep the balance low, then pay the card in full after the statement cuts.

 

Also, since you paid off your car, you may want to take a peek at the Alliant SSL thread for the credit mix points. It's not expensive or risky and it really pays off.

 

Good job being responsible with that card!

 

 

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Established Contributor
Posts: 1,014
Registered: ‎04-14-2016
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Re: What actually is the "sweet spot"?


Taggerung wrote:

I'll be honest, I didn't even know you could make multiple payments.

 

Is this more of a good habit or will help build good credit? I do understand the synonymity, but honestly I just need to build good credit as quickly as possible.

I really don't even need a credit card. I've payed for every major purchase myself since 17. But I've either done it on a payment plan without credit history or payed it in cash.


In your case then - put a small autopay bill (Netflix?) on the card, setup automatic payment for balance in-full from your checking account, and forget about it

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