topic Re: Credit Utilization Question - Using Best Rewards Card & PIF in Understanding FICO® Scoring

Credit Utilization Question - Using Best Rewards Card & PIF

Anonymous — Fri, 25 Aug 2017 02:02:24 GMT

I've tried to search this topic and I'm sure it's covered on here somewhere - I just couldn't find it. I have a hypothetical question re: the subject line...

Card 1 has a $6000 CL with a $0.00 balance

Card 2 has a $1500 CL with a $0.00 balance

Card 3 has a $5000 CL with a $0.00 balance

Card 4 has a $2500 CL with a $1900.00 balance

Unfortunately, Card 4 has a 3% cash back on ANY purchase so I use it for literally, almost ANY purchase I make, across the board, which none of the others offer. I nearly max it out every month then PIF because I'd feel foolish budgeting myself any other way. Why throw away 3% CB, right?

So, obviously, in the above example, the overall utilization is stellar but Card 4 is often showing an over 50% utilization or more depending upon when the CR is pulled. As far as the obvious, a CLI request, it's an Amazon Chase Visa and my newest (like 3 months old) card...I couldn't resist the 3% CB and 5% for anything purchased on Amazon.

This puts my in a conundrum as far as I can tell from what I've read here in general about CU and its importance. I'm hoping to apply for a VA home loan very shortly. Do I have a problem here or not? If so, ideas on how to solve it are welcome. I'll just hang up and listen and thank any and all in advance for your answers.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

Anonymous — Fri, 25 Aug 2017 07:35:47 GMT

Since when is the Chase Amazon 3% CB on everything else? I have this card and believe it's only 1% CB on everything else.

Are you paying in full every month? If you aren't carrying a balance (paying interest) on the Amazon card, why not just make an extra payment or two? This shouldn't even be necessary so long as you're making you're paying your statement balance, but just to make sure you could make an additional payment at the right time.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

HeavenOhio — Fri, 25 Aug 2017 16:52:04 GMT

FICO is going to like:

Your overall utilization of 13%. (It'd like an overall utilization of 8.9% or less even better.)
The fact that only one of four cards is showing a positive balance.

FICO is going to dislike the fact that you have a single card with 76% utilization.

If Card 4 is the one that you typically use, I'd make a payment a couple of days before the statement cuts. If you bring your current balance down to $5, you should be able to continue to use the card normally and still end up with decent utilizaition once the statement cuts.

If you're applying for a loan, don't ask for a CLI on a Chase card at this time as the request will generate one or two hard inquiries. Wait until after the loan has closed. If soft-pull CLIs are available on your non-Chase cards, you can go ahead and request them.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

SouthJamaica — Fri, 25 Aug 2017 17:21:39 GMT

@Anonymous wrote:
I've tried to search this topic and I'm sure it's covered on here somewhere - I just couldn't find it. I have a hypothetical question re: the subject line...

Card 1 has a $6000 CL with a $0.00 balance
Card 2 has a $1500 CL with a $0.00 balance
Card 3 has a $5000 CL with a $0.00 balance
Card 4 has a $2500 CL with a $1900.00 balance

Unfortunately, Card 4 has a 3% cash back on ANY purchase so I use it for literally, almost ANY purchase I make, across the board, which none of the others offer. I nearly max it out every month then PIF because I'd feel foolish budgeting myself any other way. Why throw away 3% CB, right?

So, obviously, in the above example, the overall utilization is stellar but Card 4 is often showing an over 50% utilization or more depending upon when the CR is pulled. As far as the obvious, a CLI request, it's an Amazon Chase Visa and my newest (like 3 months old) card...I couldn't resist the 3% CB and 5% for anything purchased on Amazon.

This puts my in a conundrum as far as I can tell from what I've read here in general about CU and its importance. I'm hoping to apply for a VA home loan very shortly. Do I have a problem here or not? If so, ideas on how to solve it are welcome. I'll just hang up and listen and thank any and all in advance for your answers.

1. It doesn't pay 3% cash back on everything; I don't know where you're getting that idea from, but it's not so. It pays 3% or 5% on Amazon.com; otherwise it pays 2% on 3 categories & 1% on everything else.

2. Credit card utilization has no memory. So all you have to do is pay your card down to 9% and let it report before you apply for the mortgage. I.e., you only need to worry about it about a month and a half before the application.

3. But frankly, if I were you I'd get my priorities straight. Getting a few extra nickels and dimes back on a cash back card is not something you should even be thinking about at this time; you should be solely fixated on maximizing all your scores, especially your mortgage scores. Because a slight difference in interest rate can make a huge difference in your pocket when dealing with mortgages.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

Anonymous — Fri, 25 Aug 2017 19:32:04 GMT

Sorry, I had my cards and my CB percentages mixed up. I get 2% CB on every purchase with my PenFed Power Cash Back card, being retired military, which is a requirement (or active military) I believe. In my OP, I was throwing out a hypothetical. All cards have small balances but my plan is to have those down to zero bal within the next four months, which is about the time I hope to apply for my VA home loan. Thanks to all for your feedback so far.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

Anonymous — Fri, 25 Aug 2017 19:32:55 GMT

In addition to the other helpful replies already given, I will suggest one more thing. And that is that our OP's post suggests a belief that the more he spends on a cashback card, the more money he gains.

He writes "I nearly max it out every month then PIF because I'd feel foolish budgeting myself any other way. Why throw away 3% CB, right?" and "I couldn't resist the 3% CB and 5% for anything purchased on Amazon...."

Budgeting feels foolish, the lure of cash back is something that can't be resisted, etc.

In fact, even when the cash back amount is wildly high (e.g. 5% currently on restaurants with the Chase Freedom) it is still the case that for every dollar you spend that you do not absolutely have to you are losing 95 cents.

CC issuers do not offer cash back programs because they are philanthropists. They do it because the cash back induces people to buy things they might otherwise not buy. Even a bare credit card with no rewards program at all induces people to do that.

So I would add one more thing to SouthJ's advice. In addition to focusing sharply on improving his mortgage scores, he should also be looking very critically at how he spends money, and to see whether he can reduce it. Learning how to resist the urge to swipe will be a skill (and character trait) that will be more profitable than any rewards card he could ever have.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

Anonymous — Fri, 25 Aug 2017 19:34:37 GMT

I have been on a six month long mission to lower my spending and it's allowing me to greatly reduce my debt to the tunes of thousands. Great advice for anybody.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

SouthJamaica — Fri, 25 Aug 2017 21:27:12 GMT

@Anonymous wrote:
Sorry, I had my cards and my CB percentages mixed up. I get 2% CB on every purchase with my PenFed Power Cash Back card, being retired military, which is a requirement (or active military) I believe. In my OP, I was throwing out a hypothetical. All cards have small balances but my plan is to have those down to zero bal within the next four months, which is about the time I hope to apply for my VA home loan. Thanks to all for your feedback so far.

Don't have all 4 report a zero balance; let one of them report a small balance.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

IncrsCreditScore1 — Fri, 25 Aug 2017 21:37:51 GMT

HeavenOhio wrote:

FICO is going to like:

Your overall utilization of 13%. (It'd like an overall utilization of 8.9% or less even better.)
The fact that only one of four cards is showing a positive balance.

FICO is going to dislike the fact that you have a single card with 76% utilization.

If Card 4 is the one that you typically use, I'd make a payment a couple of days before the statement cuts. If you bring your current balance down to $5, you should be able to continue to use the card normally and still end up with decent utilizaition once the statement cuts.

In addition to makig the payment quoted above, I would find out when the card reports to the credit bureaus and pay the amount currently owed about 1 or 2 days before it is reported to the credit bureaus. I have found that it is not enough to help utilization by paying only before the statement cuts.

Also, don't apply for any more credit cards until after your mortgage has been approved. The companies like no card applications at least 6 months prior to applying for a mortgage.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

HeavenOhio — Fri, 25 Aug 2017 22:14:21 GMT

@IncrsCreditScore wrote:
In addition to makig the payment quoted above, I would find out when the card reports to the credit bureaus and pay the amount currently owed about 1 or 2 days before it is reported to the credit bureaus. I have found that it is not enough to help utilization by paying only before the statement cuts.

Also, don't apply for any more credit cards until after your mortgage has been approved. The companies like no card applications at least 6 months prior to applying for a mortgage.

Good advice above. Most cards report the statement balance on the statement date, which is really simple. But there are exceptions. US Bank reports on the first of the month, so you'll want your low or zero balance just before the first. And Chase reports zero whenever you pay to zero. That's a good thing unless you're relying on a Chase card to be the one that reports a positive balance.

To get a Chase card to continuously report a positive balance:

Pay the card down to your desired small balance a day or two before the statement cuts.
After the statement cuts, charge something and let it post.
Pay the statement balance in full to avoid interest.

Once the statement balance is paid in full, you can make any payments you like as long as you don't bring your current balance to zero.

Re: Credit Utilization Question - Using Best Rewards Card & PIF

Anonymous — Tue, 05 Sep 2017 00:00:23 GMT

That is a big one with Chase I found out the hard way. I paid my Chase Amazon to $0 and my score dropped 20 points. I wondered at the time why it updated early. I figured out why. Now when I pay I keep at least $5 on it. I always pay more than the statement balance and I use the card every day for restaurants and gas and prescriptions. It is my one card I use to report a balance because I use it so often. I know all my statement and reporting days for all my cards. Sometimes you live and learn thru other means.