topic Re: 1% Utilization vs 0% Utilization which is better? in Understanding FICO® Scoring

1% Utilization vs 0% Utilization which is better?

The-Credit-Disciple — Sun, 02 Sep 2018 19:52:39 GMT

Great afternoon Fico Fam😀
Is it better to have 1% Utilization or 0%? Reason is because i read where if its always 0% it will look like your not using any credit to the Fico Scoring system. Please Fico Fam help a brother out. Thanks in advance😀😀

Re: 1% Utilization vs 0% Utilization which is better?

jdbkiang — Sun, 02 Sep 2018 20:06:38 GMT

The usual recognized sweet spot is above 0% and below 8.9%. 0% shows no usage, which is almost never a good thing, while staying below 8.9% will prevent you from looking like you’re using too much.

Re: 1% Utilization vs 0% Utilization which is better?

iv — Sun, 02 Sep 2018 20:17:29 GMT

Remember that "above 0%" really means "not $0.00".

You don't need to actually report 1% or higher - just not $0.00.

Given that some lenders won't bother to charge/report for a couple of dollars... you'll see many people recommend using $5.00 or so as your minimum.

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Sun, 02 Sep 2018 20:18:20 GMT

0% = $0 balance on all cards = All Zero FICO penalty of 15-20 points. Keep in mind that FICO scoring rounds up so any amount reporting on any card equals 1%, many front end software mistakenly rounds down and show 0% even when balance is present.

Re: 1% Utilization vs 0% Utilization which is better?

The-Credit-Disciple — Sun, 02 Sep 2018 20:38:33 GMT

Great info!! I have been paying it down to zero, wowsers. Thanks i will definitely leave a few bucks on them NOW😀

Re: 1% Utilization vs 0% Utilization which is better?

jdbkiang — Sun, 02 Sep 2018 20:39:39 GMT

To avoid interest, just pay it off before the next statement closes.

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Sun, 02 Sep 2018 20:42:52 GMT

@jdbkiang wrote:
To avoid interest, just pay it off before the next statement closes.

You have to pay the statement balance in full on or before the "statement due date" in order to avoid interest, typically about 5ish days before the next statement closing.

Re: 1% Utilization vs 0% Utilization which is better?

jdbkiang — Sun, 02 Sep 2018 20:46:47 GMT

Right. So you spend $500, pay off $480 before the statement closes. Your statement balance is now $20, then you pay it off before the due date.

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Sun, 02 Sep 2018 21:08:00 GMT

@jdbkiang wrote:
Right. So you spend $500, pay off $480 before the statement closes. Your statement balance is now $20, then you pay it off before the due date.

This is assuming you have a need for a good score in the very near future. If not, pay the $500 close to the due date to maximize the interest on the money that the cc is lending you for free.

Re: 1% Utilization vs 0% Utilization which is better?

jdbkiang — Sun, 02 Sep 2018 21:12:51 GMT

I thought it was clear OP was asking in regards to the effect utilization had on credit scores...

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Sun, 02 Sep 2018 21:16:15 GMT

@jdbkiang wrote:
Right. So you spend $500, pay off $480 before the statement closes. Your statement balance is now $20, then you pay it off before the due date.

But That's not what you said in the first post.

Re: 1% Utilization vs 0% Utilization which is better?

jdbkiang — Sun, 02 Sep 2018 21:23:40 GMT

As long as you pay it off before the next statement closes, you won’t be charged interest. To clarify—you spend $500, pay off $480 before the statement closes. Your statement balance is now $20, then you pay it off before the due date (you must make at least a minimum payment to avoid a late payment, but you will NOT be charged interest as long as you pay it off before the next statement closes.

Another example: you spend $100 out of a $1000 CL. Then you pay $50 off before the statement closes. Your utilization reports as 5%. You make a minimum payment of $25 at the due date to avoid late payments. Then before the next statement closes, you pay off the remaining $25. You won’t be charged interest.

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Sun, 02 Sep 2018 21:31:25 GMT

@Anonymous wrote:
@jdbkiang wrote:
Right. So you spend $500, pay off $480 before the statement closes. Your statement balance is now $20, then you pay it off before the due date.
This is assuming you have a need for a good score in the very near future. If not, pay the $500 close to the due date to maximize the interest on the money that the cc is lending you for free.

Absolutely right but it's an uphill battle on this board where micromanaging at all times rather than putting everything on auto pilot seems to be the trend, I experimented with AZEO, AZE2...AZE6 for a better part of last and this year, have been on auto pilot the last 5 months letting my natural revolving balance collect 4% APY in my rewards checking through grace period, the difference in my FICO is about 3-5 points.

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Sun, 02 Sep 2018 21:38:29 GMT

@jdbkiang wrote:
As long as you pay it off before the next statement closes, you won’t be charged interest. To clarify—you spend $500, pay off $480 before the statement closes. Your statement balance is now $20, then you pay it off before the due date (you must make at least a minimum payment to avoid a late payment, but you will NOT be charged interest as long as you pay it off before the next statement closes.

Another example: you spend $100 out of a $1000 CL. Then you pay $50 off before the statement closes. Your utilization reports as 5%. You make a minimum payment of $25 at the due date to avoid late payments. Then before the next statement closes, you pay off the remaining $25. You won’t be charged interest.

Again, that is incorrect, you must pay the full statement balance of $50 by due date to avoid paying interest. If you only pay the minimum of $25 on due date, you are now carrying a balance of $25 and lost your grace period on future new charges, even if you pay the remaining $25 before the next closing date.

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Sun, 02 Sep 2018 22:42:33 GMT

While it more or less goes without saying and is sort of splitting hairs on the OP's original question, this discussion is referring to reported utilization and it's impact on credit score.

If we're looking at utilization in the true sense of the term, revolving debt wise, it's "better" to be at 0% (no revolving debt) rather than 1%. I'm quite sure that isn't what the OP was thinking, but it is worth mentioning here.

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Sun, 02 Sep 2018 23:04:16 GMT

@The-Credit-Disciple wrote:
Great info!! I have been paying it down to zero, wowsers. Thanks i will definitely leave a few bucks on them NOW😀

Not "on them." You only need to leave a small balance on ONE card. Its perfectly fine to pay the others down to zero.

Re: 1% Utilization vs 0% Utilization which is better?

jdbkiang — Tue, 04 Sep 2018 00:39:34 GMT

@Anonymous wrote:
@jdbkiang wrote:
As long as you pay it off before the next statement closes, you won’t be charged interest. To clarify—you spend $500, pay off $480 before the statement closes. Your statement balance is now $20, then you pay it off before the due date (you must make at least a minimum payment to avoid a late payment, but you will NOT be charged interest as long as you pay it off before the next statement closes.

Another example: you spend $100 out of a $1000 CL. Then you pay $50 off before the statement closes. Your utilization reports as 5%. You make a minimum payment of $25 at the due date to avoid late payments. Then before the next statement closes, you pay off the remaining $25. You won’t be charged interest.
Again, that is incorrect, you must pay the full statement balance of $50 by due date to avoid paying interest. If you only pay the minimum of $25 on due date, you are now carrying a balance of $25 and lost your grace period on future new charges, even if you pay the remaining $25 before the next closing date.

Maybe that's your experience, but I've done what I've written above numerous times and I've never paid a penny of interest for any of my credit cards. If the remaining $25 is paid off by the time the next statement closes, the $25 won't be on the statement and neither will you be charged any interest for that non-existent $25.

Re: 1% Utilization vs 0% Utilization which is better?

Revelate — Tue, 04 Sep 2018 01:02:05 GMT

I think we're arguing sematics here.

The due date is generally just before the next statement closes anyway, so I believe you're both stating the same thing TBH and that is correct in my experience.

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Tue, 04 Sep 2018 01:15:22 GMT

@jdbkiang wrote:
@Anonymous
Maybe that's your experience, but I've done what I've written above numerous times and I've never paid a penny of interest for any of my credit cards. If the remaining $25 is paid off by the time the next statement closes, the $25 won't be on the statement and neither will you be charged any interest for that non-existent $25.

jdbklank: If you pay off the $25 in the few days between the due date and the statement closing date, you will not be charged interest on the $25, but you should be charged interest on any new charges. Since you did not pay any interest, I assume that your statement closed with a $0 balance. Is that correct?

Re: 1% Utilization vs 0% Utilization which is better?

Anonymous — Tue, 04 Sep 2018 01:25:11 GMT

@jdbkiang wrote:
@Anonymous wrote:
@jdbkiang wrote:
As long as you pay it off before the next statement closes, you won’t be charged interest. To clarify—you spend $500, pay off $480 before the statement closes. Your statement balance is now $20, then you pay it off before the due date (you must make at least a minimum payment to avoid a late payment, but you will NOT be charged interest as long as you pay it off before the next statement closes.

Another example: you spend $100 out of a $1000 CL. Then you pay $50 off before the statement closes. Your utilization reports as 5%. You make a minimum payment of $25 at the due date to avoid late payments. Then before the next statement closes, you pay off the remaining $25. You won’t be charged interest.
Again, that is incorrect, you must pay the full statement balance of $50 by due date to avoid paying interest. If you only pay the minimum of $25 on due date, you are now carrying a balance of $25 and lost your grace period on future new charges, even if you pay the remaining $25 before the next closing date.
Maybe that's your experience, but I've done what I've written above numerous times and I've never paid a penny of interest for any of my credit cards. If the remaining $25 is paid off by the time the next statement closes, the $25 won't be on the statement and neither will you be charged any interest for that non-existent $25.

@I actually thought about this some more the other night, was going to post clarifications but decided to let it go. Your scenario can be correct only if the residual interest is too small to post and that you didn't make new charges in the new cycle, sorta like the instruction to reset your grace period. Daily interest for $25 @ 20% APR is only 1.36 cents per day, at let's say 20 days (you lose your grace period on the balance you didn't pay off by due date) it's only 27 cents, probably too small to report for most if not all lenders, and since the statement reported $0, the grace period is reset. Had the left over balance been say $400, the daily interest would have been 21.9 cents, at 20 days = $ 4.38, the residual interest would have posted on the new statement. This of course assumes there are no new charges or the statement will not report $0.