12-27-2012 08:14 PM
I'm going to step outside the box and state that I don't follow the robotic utilization patterns unless I'm going to be applying for something in that month. Certainly if the scores are very important and if you want to minimize utilization as a game, then following the utilization pattern of <9% utilization on one card and all other cards reporting a zero balance will give you the desired results.
What I do try to do is keep all of my spending on my Amex charge card, which doesn't impact my utilizations. The benefit to letting a balance report depends on the lender. If your total CL on a card is 4k, and your highest balance ever reported on the card is $350, then why would that creditor or any other creditor be tempted to give you higher limits?
If you can show that you use your current lines reponsibly, then you can get higher limits in the future. Irresponsible behavior such as "maxing out" cards, and missing payments or only paying the minumums should be avoided at all costs.
that's my 2 cents worth!
Utilization is good to consider for four reasons.
1. Applying for new credit.
2. Getting CLI's
3. Solicitation for new credit.
4. Nervouse lenders.
While the first and second one can easily be dismissed and played with in the month that you wish to do extend your credit, the other two cannot. Depending on the creditor who is soliciting you this might be a factor when they ask the credit bureaus for a list of candidates. Certainly some lenders are more nervous than others and if they see a large utilization it might actually affect how they treat your account. It could mean a lower interest rate offered to you or even an extension of credit on their end. Using all your available credit could cause some lenders to simply decide that you are a greater risk. I say could, so don't all of you jump and cry foul at once.
I think it always wise to get limits increased as often as possible to avoid issues with utilization. I also think it wise to never carry a balance forward. While there is no easy way for creditors to track whether this is revolving or new purchases, it can be done to some small degree. I think Capone figured this out long ago, they are known for getting a soft pull as often as once a week. There must be a reason they do this or a few reasons they do it. They certainly have reasons they do what they do, not all of them in the best interest of the customer! How many sub-prime cardholders do they have? If they know the risk of these individuals then they can take steps to insure their strategies are met by knowing the utilization of their customers.
To test some of the theories about utilization and how it affects a score I loaned one of my cards to my sister. I'm not paying for the interest so I don't really care how much is charged to it. I also care how much is charged to it to, to test this and other theories! It does affect your score! Even one card nearly maxed out affects the score even if your overall utilization is less than recommended! Since I am just gardening anyway, her debt to my card is not that important and helps with the high balance on the report. (Don't worry, I can pay off her debt in a hearbeat if needed! I have ten times in savings to what she owes on the card!) I am waiting to see what the threshold is for one card compared to overall usage! I owe about $25 on my cards right now, she owes the other 20% of my utilization! (Yeah, I am benefitting from her using the card in the long term, both with that card and with my overall report!) It will be interesting to find out how much utilization on one card is weighed to the overall and about what that % is.
Credit is just like a video game. Some people have already gotten the experience from other games. Others, well they just have to learn. You go out on a quest. If you die or get wounded you just restart from the last save point or heal. Unlike a video game, we don't have a last save point or magic potions to heal instantly.
So maybe one day we will get a SIMs credit game so we can prepare better for real life.