topic Re: Utilization rates and maximizing large spends in Credit Cards

Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 00:48:04 GMT

Hey all!

I'm new to the world of credit, but wanted to seek some advice regarding an upcoming large spend period.

My FICO score is around 650. I'm a recently out of college, had a single credit card I haven't utilized in years (but which contributed to an account age of 7 years). Income is around 100k, no outstanding debt.

I am newly engaged and have a large amount of spend in the next year or so as a result of wedding expenses. Before I educated myself, I attempted to sign up for the barclays uber card and was denied.

Realizing my mistake, I did some research, found my actual score and recalibrated the class of cards I was looking for. I used Cap1's preapprove program and got into quicksilver at 2k CL and a 150$ sub for 500 spend.

If I want to maximize my upcoming spend, does it make sense to apply for products with a better sub program in the coming months? I've read that keeping utilization low is important to building credit, if I want to use my Cap1 card for some larger wedding expenses, can I pay it off before the month ends in order to keep reported utilization low? The card will be PIF regardless.

Really appreciate any help, still getting oriented with the game.

Re: Utilization rates and maximizing large spends

NRB525 — Thu, 19 Sep 2019 01:25:28 GMT

Yes, you can pay off charges on any credit card after they move from Pending to Posted. With Capital One they are as good as any for getting the payments cleared.

Yes, targeting to get your balance lowered in the days before your statement is processed is a good way to manage reported utilization.

Question to clarify what you mean by “haven’t utilized in years”. Does this mean you have not had any credit card statement balances reporting any amounts except zeros for years? If that is the case, it might relate to your 650 score. Are there any late payments in your past?

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 01:26:34 GMT

I guess my main question is what is causing your score to be only 650? I'm guessing either payment history issues, high utilization, or a combination of both? Whatever the issue, you'll want to rectify it prior to apping for products or you'll expect either denials or low-limit/starter bucket approvals. Your income and length of credit history are sufficient, so it really comes down to the factors holding back your score.

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 01:30:07 GMT

I'm still pretty new to this, so not 100% sure. I've done the credit check through cap1, no late payments. All categories are excellent except for available credit which is showing as 0$ and recent inquiries which shows 3 / 24.

I had my parents open the account for me 7 years ago(which is the reported oldest credit line), maybe they did it so that I'm a sub-account or some such, and the CL on that old card might not show up under my report?

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 01:34:58 GMT

In conversation with my folks, it's an additonal card on my parents account. They said it should be reporting on my credit, but maybe the CL from that card doesn't count towards my report.

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 01:48:27 GMT

What's the source of your "around 650" Fico score?

I'd suggest heading to creditscore.com and grabbing your free EX Fico 8 score. Along with that you'll get some good summary info of your accounts including payment history, utilization, etc. Based on that you can report back what you're seeing and what your opportunities are.

Someone with a brand new credit file that's 6 months old and clean with low utilization will debut often with a Fico score in the 700-730 range. The fact that with a more aged and thicker file you're coming in well below that is suggestive of only those 2 things I referenced earlier... payment history issues or utilization (amounts owed) issues, or both.

Re: Utilization rates and maximizing large spends

K-in-Boston — Thu, 19 Sep 2019 01:51:39 GMT

I would grab your 3 credit reports from annualcreditreport.com and check to see which (if any) of the credit bureaus that card is reporting to. It should factor into your utilization, age and scoring. CapOne uses a VantageScore score and their credit information while giving you your actual VantageScore 3.0 score (for TransUnion I believe) may not display the correct numbers that your score is based on as they usually discard closed accounts and authorized user accounts, which do factor into scoring. Where did you obtain your actual FICO score, and which version? You can get your Experian FICO 08 free from Discover at creditscorecard.com

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 02:01:30 GMT

Thanks for the advice folks, very much appreciated!

I went to creditscore.com, and they have my number at a 708. They do show a quite high credit card debt of 9.5k. Talking to my parents, this debt is from the card I have which is a subcard of theirs.

Maybe this is the culprit? There are no late payments for this card, but it could still be high utilization. I feel like i should stay on this card since it's the only one noted as open on my account, how big of a deal is the high utilization?

Re: Utilization rates and maximizing large spends

K-in-Boston — Thu, 19 Sep 2019 02:12:07 GMT

It really depends on the amount of utilization. $9500 on a $10,000 card is murder on your scores. $9500 on a $100,000 card is perfectly fine. What is the limit showing on the card? All in all, the age and presence of the card is likely helping your score regardless of the utilization if you have very limited credit of your own. However, getting approved for credit might be difficult if the card is nearly maxed.

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 02:19:00 GMT

The report currently shows me at 0% utilization and 0 credit, even with the 9.5k debt.

I will look into the limit on that card, but as you said, it's likely a net benefit anyways. I don't have full control over that utilization amount, as the current debt on that card is my folks. I haven't used that card in years myself.

Re: Utilization rates and maximizing large spends

K-in-Boston — Thu, 19 Sep 2019 02:25:08 GMT

@Anonymous wrote:
The report currently shows me at 0% utilization and 0 credit, even with the 9.5k debt.

I will look into the limit on that card, but as you said, it's likely a net benefit anyways. I don't have full control over that utilization amount, as the current debt on that card is my folks. I haven't used that card in years myself.

If you drill down on the account, it should show the last statement balance and the credit limit. (Unless this is a charge card like Amex Gold or Platinum? May have missed that.) If it is showing you as 0% utilization, either the display is incorrect or it’s a charge card.

Is your Capital One card showing on your reports or is it too new?

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 03:24:52 GMT

@Anonymous wrote:
The report currently shows me at 0% utilization and 0 credit, even with the 9.5k debt.

Well, that doesn't make any sense. What type of card is this?

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 07:02:48 GMT

K-In-Boston you are 100% correct, it is an Amex gold card. I'll do some research on charge cards, I'm not sure what those are currently, but it sounds like I have one.

My apologies for the trickle information, I will strive to give you guys the full picture in any future posts.

The cap1 card hasn't shown up on my reports yet, hopefully soon!

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 13:04:39 GMT

Charge cards require the balance to be paid off monthly. Because they have no preset spending limit the way a revolver does, they don’t factor into utilization. They affect your score via payment history. When your new card reports, you’ll likely see your scores go up - many of us reported score increases when opening our first 2-3 cards. Allowing a small balance, maybe $10, to report on your new card will gain you some points too, as FICO scores take a hit when no balances are reporting, under the idea that basically your debt management skills can’t be assessed perfectly if you’re not managing any debt.

Re: Utilization rates and maximizing large spends

NRB525 — Thu, 19 Sep 2019 09:24:24 GMT

Then, actually, you already probably have the credit tool you need to answer your opening question. An AMEX Gold card has no preset spending limit. The amount you can charge on it depends on your spending patterns. This may include your parents spending habits, but that level of detail does not turn up often, so it seems a stretch that it benefits an Authorized User spending limit.

You should be able to run a substantial amount of your wedding expenses through the Gold card Authorized User account.

The amount you charge each month is due in full soon after the statement prints, but the amount you charge on the Gold card does not impact your utilization measure on FICO scoring. With the CapOne card, that $2k limit will quickly reach high utilization, leading to the need for frequent payments during the month if you want to keep statement-reported utilization reasonable.

Re: Utilization rates and maximizing large spends

K-in-Boston — Thu, 19 Sep 2019 17:36:41 GMT

@Anonymous wrote:
K-In-Boston you are 100% correct, it is an Amex gold card. I'll do some research on charge cards, I'm not sure what those are currently, but it sounds like I have one.
My apologies for the trickle information, I will strive to give you guys the full picture in any future posts.
The cap1 card hasn't shown up on my reports yet, hopefully soon!

No need for apologies; I'm just glad the thought popped into my head. Given that it is a charge card, everything makes perfect sense now and the displays are correct. The card is certainly helping you by having an aged account in good standing and whatever the balance is should not affect you (which would not be true if it were a revolving card). The most common charge cards are the Green, Gold, and Platinum cards from American Express. Because they are charge cards, they are not treated the same as a credit card with a revolving limit (although most people do have a feature called Pay Over Time on these cards that allows you to revolve a balance, so the lines are a bit blurred).

Credit mix is one of the key parts of credit scoring, and having revolving credit cards is generally necessary for a great score. Additionally, the amount of utilization of revolving accounts is another big part of scoring. If you show $0 of use on your credit reports, you are a higher risk than someone showing a small balance, or balances, because they cannot assess how you handle revolving credit. As mentioned, once your new Capital One shows up on your credit reports, you should see a decent score boost especially if you can ensure that your statements on the card close with at least a $5 balance but less than about $575 (there is a score penalty at 30% utilization, and due to rounding 29.00000001% becomes 30%). That doesn't mean you need to carry a balance and accrue interest, just use the card as normal, pay it down mid-month if needed, but make sure that the day that your statement generates (I believe CapOne makes it prominent in your online account with "Next closing date" or something like that) your balance is between those parameters. Once that happens, you really should be in a good position to start considering which credit cards may make sense for you to apply for that will benefit you long-term. Credit is a marathon and not a sprint, but in this analogy you can consider that Amex Gold card to be your years of training and the CapOne reporting to be the starting pistol for your credit marathon.

The previous denial with Barclay also makes sense now; in addition to them being known as a somewhat conservative lender you were essentially asking them to issue you your very first credit card. Keep in mind that some lenders' internal scoring methods will also exclude any authorized user history as well.

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 18:11:38 GMT

@NRB525 wrote:
Yes, you can pay off charges on any credit card after they move from Pending to Posted. With Capital One they are as good as any for getting the payments cleared.

It's not a big issue, but one of my gripes with Cap1 is tnhat you cannot pay more than $9 over the current balance. Even if there is a pending charge. With Amex I can pay over in the amount of the pending charge.

OP I am somewhat surprised that you were able to make it all through College without ever applying for a CC, so kudos for resisting that temptation for so many years. It seesm to be the norm for so many kids once they reach 18-20 to immediately app for credit.

Re: Utilization rates and maximizing large spends

Anonymous — Thu, 19 Sep 2019 19:21:29 GMT

Got it. I'll wait for the cap1 score bump to post, and in the meantime, I'll start browsing around here to see what sort of products I should be looking for once my score is in order.

Thanks so much to everyone in this thread, I learned a lot. Your help is very much appreciated!