topic Re: Utilization in Credit Cards

Utilization

Anonymous — Tue, 02 Apr 2013 13:32:57 GMT

Last month when I only had 2 cards and not 5 I used to pay both off almost weekly, and make sure to not have a balance when my statement cut.

Now that I have 5 cards and have been reading on here that 1-9% is ideal and 0% isn't

I am wondering if I just set up all my credit cards to be paid in full, (through the auto pay on all of them, so it will be after the statement cuts)
If having 4 or 5 cards report with a balance is a bad thing?

9% of my credit is around 2k, so I'll never spend that much, so I don't need to worry about going over the 9% but will having multiple cards post with a balance be a bad thing? Should I pay off some in full before the statement and let one or two have auto pay?

Re: Utilization

fittiger — Tue, 02 Apr 2013 14:32:58 GMT

@Anonymous wrote:
Last month when I only had 2 cards and not 5 I used to pay both off almost weekly, and make sure to not have a balance when my statement cut.

Now that I have 5 cards and have been reading on here that 1-9% is ideal and 0% isn't

I am wondering if I just set up all my credit cards to be paid in full, (through the auto pay on all of them, so it will be after the statement cuts)
If having 4 or 5 cards report with a balance is a bad thing?

9% of my credit is around 2k, so I'll never spend that much, so I don't need to worry about going over the 9% but will having multiple cards post with a balance be a bad thing? Should I pay off some in full before the statement and let one or two have auto pay?

Its best to only have one, maybe two showing a balance. I believe the number of accounts carrying a balance is factored into the score, 1 being the best.

Re: Utilization

Anonymous — Tue, 02 Apr 2013 14:41:51 GMT

As the scoring process doesn't care about utilization history, you need only consider utilization when you are going to app for something. I think it's a good idea to have all cards on auto-pay, (to avoid interest/late charges/penalty rates if you forget to pay) and then, when you think you will be apping do the "PIF on all but one card, before the statements cut" Of course this needs some lead time, as each card reports just once a month.

Re: Utilization

Anonymous — Tue, 02 Apr 2013 15:20:47 GMT

I understand utilization has no history, so having them all on auto for that reason will make no long term difference, But does the affect using more than one credit card in a month has on my score have a history? As in if I use all 5 and just use auto pay so they all post with a balance for a year and then decide I want to apply for something I pif before the statement ends on all but one, it wouldn't matter I was using more than one for that year right?

Re: Utilization

Anonymous — Tue, 02 Apr 2013 15:33:58 GMT

@Anonymous wrote:
I understand utilization has no history, so having them all on auto for that reason will make no long term difference, But does the affect using more than one credit card in a month has on my score have a history? As in if I use all 5 and just use auto pay so they all post with a balance for a year and then decide I want to apply for something I pif before the statement ends on all but one, it wouldn't matter I was using more than one for that year right?

Right. (And remember this is all "As far as we know" since FICO doesn't reveal all the details). So the understanding is that your credit report gets pulled and one of the factors is "How many accounts have a non-zero balance". This is just a snapshot at the time the report is pulled, so no history.

I don't know why some things don't have history, maybe they found that doing so isn't very predictive. Obviously some things need to have history, I want to see if you were late in the past, or had a BK etc. Knowing that you didn't have a BK THIS month is probably not enough for some of those picky lenders!

Re: Utilization

Anonymous — Tue, 02 Apr 2013 16:05:55 GMT

Awesome. Thanks, it'll be nice to just have auto pay and not worry about PIF before 5 statements end

Re: Utilization

Anonymous — Tue, 02 Apr 2013 16:50:43 GMT

So carrying a balance is not necessarily bad thing as long as you are only utilizing below 10 - 20% of your total credit limit...correct?

Re: Utilization

Anonymous — Tue, 02 Apr 2013 17:09:56 GMT

From what I understand, for short term scores, you want to be between 1-9%

but long term your Utilization doesn't matter because there is no history so if you have 75% utilization one month your score may go down, but if you pay it down to between 1% and 9% it will go back up.

It is my understanding that unless you are going to be applying for something in the coming month you do not need to worry about your utilization.

But remember it can take over a month for the new balances to be on your report

Re: Utilization

SnackTrader — Tue, 02 Apr 2013 17:17:41 GMT

Carrying a balance is ALWAYS a bad thing!!!

There's a huge difference between reported utilization and carrying a balance. Going through it is difficult on a cell phone, but if you follow the links on this thread, and the links in the subsequently linked threads (it's a maze of links) you should be able to find the difference between reported utilization and carrying a balance.

Basically, carrying a balance means paying interest by not paying off ALL of your charges by the due date. Utilization only involves the balance reported to the credit bureaus (typically on the statement close date).

I really need to write a big sticky on this...

http://ficoforums.myfico.com/t5/Credit-Cards/Help-understanding-credit-cards-amp-the-best-way-to-use-them/m-p/2007993

Re: Utilization

SpiceIslander — Tue, 02 Apr 2013 17:23:45 GMT

I believe it's no MORE than 9%.

Re: Utilization

Anonymous — Tue, 02 Apr 2013 17:26:29 GMT

@SnackTrader wrote:
Carrying a balance is ALWAYS a bad thing!!!

There's a huge difference between reported utilization and carrying a balance. Going through it is difficult on a cell phone, but if you follow the links on this thread, and the links in the subsequently linked threads (it's a maze of links) you should be able to find the difference between reported utilization and carrying a balance.

Basically, carrying a balance means paying interest by not paying off ALL of your charges by the due date. Utilization only involves the balance reported to the credit bureaus (typically on the statement close date).

I really need to write a big sticky on this...

http://ficoforums.myfico.com/t5/Credit-Cards/Help-understanding-credit-cards-amp-the-best-way-to-use-them/m-p/2007993

oh, I didn't say carrying a balance, I was just talking about reported utlization, if you have a statement on your card being maxed out but you pay it off in full after the statement cut, its still going to be reported as being at the whole amount of the CL

but I know you should always pay off your balance by the end of the grace period each month so you do not get charged any interest

but as far as utilization goes, if you do pay interest and carry a balance it is only a short term loss of pionts, if you then pay off the balance and let it report at 1-9% your score will go back up, correct?

and paying interest?carrying a balance in its self doesn't affect your score does it?

because the CRAs dont know if its all new charges this month of if youre carrying a balance, right?

Re: Utilization

SpiceIslander — Tue, 02 Apr 2013 17:34:29 GMT

I'm sorry I misunderstood. If you pay the balance off before the statement cuts, you'll be fine. There are some exceptions, though. My CU reports the balance as of the day they report to the CRAs, NOT the statement balance. The statement cuts on the 11th and they report on the 24th. I've learned not to use the card until after the 24th.

Re: Utilization

Anonymous — Tue, 02 Apr 2013 17:36:11 GMT

Right, but that's short term anyways

Re: Utilization

SnackTrader — Tue, 02 Apr 2013 17:46:03 GMT

I was attempting to clarify for mistasteve. The rest of you appear to have the basics on optimizing score down.

With that said - I rarely follow that method since I couldn't care less what my score is when I'm not applying for cards

Re: Utilization

Anonymous — Tue, 02 Apr 2013 17:49:04 GMT

Same here, I'm just going to set up auto pay and not care about until I want to apply for credit

Re: Utilization

Anonymous — Tue, 02 Apr 2013 18:07:04 GMT

I misunstood the difference between carrying a balance and utilization. I was thinking that if you had a balance on your card you were OK as long as it was no more than 10% of your limit.

So just owning a credit card and not using it can help your credit?