topic Re: Credit Card Utilization. in General Credit Topics

Credit Card Utilization.

Anonymous — Sat, 19 Jul 2014 16:33:05 GMT

I read this in a forum:

I use to be a mortgage loan officer. The way I understand it, you should only use 30% of whatever your limit is on any card you hold. If you have a limit of $1,000.00 for example, you want to keep your balance at or below $300.00. Totally ignore the real limit and treat the card as if your limit is just $300.

To avoid paying high interest, pay off all but $5.00 of your balance (or as much as you can afford) each billing cycle. Leaving a $5.00 balance will automatically register with all three credit bureaus that your manageing the card at less than 30% usage. Bottom line, never allow your limit to go over $300.00 /or 30% of your actual limit. If you do this with each of your cards, you should have an "A" for credit card usage within a years time.

Is it a good idea to leave $5.00 in your account every month?

Re: Credit Card Utilization.

Anonymous — Sat, 19 Jul 2014 17:00:15 GMT

It's not exactly clear what the person is suggesting.

If they are suggesting that you pay off your entire balance minus $5 BEFORE the statement cuts, then yes that is a good idea. It is good to show some activity (hence having the statement cut with $5 is better than $0). However, this can be annoying to actually do. I used to do this when I had only one credit card and I think that helped me build a high score fast. But with multiple cards it's annoying.

If they are suggesting that say, your statement cuts and you owe $500 to the cc company but you only pay $495 and pay a little interest on the $5, then that seems like a bad idea. Won't help your credit any more than paying the entire balance off would.

Re: Credit Card Utilization.

Anonymous — Sat, 19 Jul 2014 17:03:16 GMT

It is sort of right. It does NOT matter how much you charge each month, it is what the cc reports as the balance to the credit agencies each month. Believe it or not, yes having a balance report each month on one card actually helps your score vs. zero balance. That said, keep it under 10% not 30 and just leave the balance on one card, pay the others off each month so you don't have to pay interest on them. That does NOT mean to not use the card as you wish even up to your limit each month. It only matters on what reports, so just be sure to pay it down before the next statement is cut. You can also pay most cc companies many times through the month if you like. I put most everything I can on my amex bcp but pay them multiple times each month. My limit is 20K, but I rarely charge more than 5K a month. I like getting the cash back though so I use it and pay it off usually once a week.

Re: Credit Card Utilization.

mongstradamus — Sat, 19 Jul 2014 17:07:54 GMT

@Anonymous wrote:
It is sort of right. It does NOT matter how much you charge each month, it is what the cc reports as the balance to the credit agencies each month. Believe it or not, yes having a balance report each month on one card actually helps your score vs. zero balance. That said, keep it under 10% not 30 and just leave the balance on one card, pay the others off each month so you don't have to pay interest on them. That does NOT mean to not use the card as you wish even up to your limit each month. It only matters on what reports, so just be sure to pay it down before the next statement is cut. You can also pay most cc companies many times through the month if you like. I put most everything I can on my amex bcp but pay them multiple times each month. My limit is 20K, but I rarely charge more than 5K a month. I like getting the cash back though so I use it and pay it off usually once a week.

I learned that hardway about zero util, i had an au account report which i thought would show util. It didn't so my score got dinged pretty harshly, about an 25 point drop. I just had my BCP report earlier this week , and my score recouped its 25 points. So as far as util goes have something report i like around the 5 % range is pretty safe.

Re: Credit Card Utilization.

SevenNEW — Sat, 19 Jul 2014 17:12:11 GMT

@Anonymous wrote:
It is sort of right. It does NOT matter how much you charge each month, it is what the cc reports as the balance to the credit agencies each month. Believe it or not, yes having a balance report each month on one card actually helps your score vs. zero balance. That said, keep it under 10% not 30 and just leave the balance on one card, pay the others off each month so you don't have to pay interest on them. That does NOT mean to not use the card as you wish even up to your limit each month. It only matters on what reports, so just be sure to pay it down before the next statement is cut. You can also pay most cc companies many times through the month if you like. I put most everything I can on my amex bcp but pay them multiple times each month. My limit is 20K, but I rarely charge more than 5K a month. I like getting the cash back though so I use it and pay it off usually once a week.

+1. You can use your card as much as you want, as long as you pay before the statement cuts.

Re: Credit Card Utilization.

Anonymous — Sat, 19 Jul 2014 17:12:32 GMT

The best option for this in my opinion (if you can do it) is to increase your credit line on the cards you use heavily.

If you charge $1000 on your cap1 quicksilver or whatever, try to get cap1 to increase your limit to $10,000, set on autopay, never have to worry about it ever again.

Re: Credit Card Utilization.

ezdoesit — Sat, 19 Jul 2014 17:43:20 GMT

The utilization part of the fico scoring has no memory like payment history and it can change from month to month. So unless you are planning on applying for something that following month then I would just keep it simple, wait for the statement to cut pay it off and you still pay no interest. JMO.

Re: Credit Card Utilization.

Anonymous — Sat, 19 Jul 2014 18:42:13 GMT

before the statement cuts (lets say its 3rd aug 2014) & payment due date is 28th july 2014.

if you miss payment by its due date and payoff by statement date isnt a penalty charged by cc which can also bring it to penaltyapr.

u payoff by due date & charge $5 before statement date and payoff before stmt date i think it works better.

Re: Credit Card Utilization.

vanillabean — Sat, 19 Jul 2014 19:57:17 GMT

Leaving $5 in your account at the statement date is good. Leaving $5 in your account at the due date is bad.

Also, there's nothing to indicate that any given percentage such as 30% signals any particular threshold.

Re: Credit Card Utilization.

takeshi74 — Sun, 20 Jul 2014 01:29:42 GMT

@Anonymous wrote:
To avoid paying high interest, pay off all but $5.00 of your balance (or as much as you can afford) each billing cycle. Leaving a $5.00 balance will automatically register with all three credit bureaus that your manageing the card at less than 30% usage.

Balance does not have to be carried to report. Most cards report at statement end. To avoid paying interest pay in full by due date.

@Anonymous wrote:
Is it a good idea to leave $5.00 in your account every month?

Not unless you just want to pay interest on that $5. Again, balance probably reports at statement end unless it's one of those cards that reports at a different point.

Re: Credit Card Utilization.

Anonymous — Mon, 21 Jul 2014 04:20:00 GMT

Will you please explain "balance probably reports at statement end" in a little greater detail. I am under the impression that in chronological order there is payment due date, followed by a few days "grace period", then statement. Anything charged in the "grace period" is part of the utilization/statement?

Re: Credit Card Utilization.

Anonymous — Mon, 21 Jul 2014 05:37:15 GMT

Different companies report at different times. They may even report before generating a billing statement, let alone the due date. Hence, you might find your card is reported with a balance even if you pay it off in full every month, because you have not yet paid it off by the time it the balance is reported. (This is not a problem if you do not use a large percentage of your credit limit every month, of course.) If you want to avoid this issue, keep your receipt and then pay the amount on the day that you racked up the charge.

There does not seem to be a distinction between "real" debt and debt you actually pay in full before the due date, though of course it is reported whether you make minimum payments on time.

Re: Credit Card Utilization.

takeshi74 — Mon, 21 Jul 2014 13:03:36 GMT

@Anonymous wrote:
I am under the impression that in chronological order there is payment due date, followed by a few days "grace period", then statement. Anything charged in the "grace period" is part of the utilization/statement?

It's the other way around. Statement end, grace period then due date. A statement has to be closed out for billing. Once a statement is closed, pending charges are applied to the following cycle.

@Anonymous wrote:
Different companies report at different times. They may even report before generating a billing statement, let alone the due date. Hence, you might find your card is reported with a balance even if you pay it off in full every month, because you have not yet paid it off by the time it the balance is reported.

They do but most report at statement end which is why a balance will report even if payment is made in full by the due date (but after statement end).

Re: Credit Card Utilization.

Anonymous — Mon, 03 Nov 2014 17:41:34 GMT

The more owed relative to the credit card limit (cap), the lower a FICO score. And there are cutoffs or segments, meaning that within certain ranges of a balance percentage there's no effect, and then a change when a balance hits a cutoff.

The cutoffs are as follows: 0–19 percent, 20–39 percent, 40–59 percent, 60–79 percent, 80–99 percent, and 100+ percent. Each increasing cutoff harms a score the same amount as the previous (e.g., if a balance goes from 39–40 percent, it will harm a score at the same rate as its going from 79–80 percent would). (Many "experts" claim 50 percent of the credit limit is a magic number. But as you can see, this is wrong.) Keep all balances on your revolving (credit card) accounts below 40 percent of the credit limit, and never exceed that amount. If possible, never exceed 19 percent.

Re: Credit Card Utilization.

MarineVietVet — Mon, 03 Nov 2014 19:25:00 GMT

@Anonymous-own-fico wrote:
Leaving $5 in your account at the statement date is good. Leaving $5 in your account at the due date is bad.

Also, there's nothing to indicate that any given percentage such as 30% signals any particular threshold.

I agree. There are no hard and fast rules because all of our credit profiles are different and they are constantly changing.

Re: Credit Card Utilization.

MarineVietVet — Mon, 03 Nov 2014 19:27:09 GMT

@Anonymous wrote:
H

The more owed relative to the credit card limit (cap), the lower a FICO score. And there are cutoffs or segments, meaning that within certain ranges of a balance percentage there's no effect, and then a change when a balance hits a cutoff.

The cutoffs are as follows: 0–19 percent, 20–39 percent, 40–59 percent, 60–79 percent, 80–99 percent, and 100+ percent. Each increasing cutoff harms a score the same amount as the previous (e.g., if a balance goes from 39–40 percent, it will harm a score at the same rate as its going from 79–80 percent would). (Many "experts" claim 50 percent of the credit limit is a magic number. But as you can see, this is wrong.) Keep all balances on your revolving (credit card) accounts below 40 percent of the credit limit, and never exceed that amount. If possible, never exceed 19 percent.

Hi there.

I've been gone for awhile and may have missed something but could you name a source for these numbers?

Re: Credit Card Utilization.

Anonymous — Wed, 05 Nov 2014 18:17:27 GMT