topic Re: Maintaining low utilization rate with avoiding interest in General Credit Topics

Maintaining low utilization rate with avoiding interest

Anonymous — Wed, 28 Apr 2021 18:01:11 GMT

Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.

This leads me to my question... I have a bill that is charged, a statement date, a due date and an utilization rate. When do I setup the automatic payment to the card? Before the statement date (I would think doing this would result in a 0% utilization rate). On/before the due date (this should have the utilization rate updated, but will there be residual interest?)

On a side note, does anyone see any holes in my strategy? Should I also try to keep my total utilization rate over that 1% as well (some store cards will remain at 0%). Should I close those store cards that will rarely be used?

Re: Maintaining low utilization rate with avoiding interest

Horseshoez — Wed, 28 Apr 2021 18:11:39 GMT

@Anonymous wrote:
Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.

This leads me to my question... I have a bill that is charged, a statement date, a due date and an utilization rate. When do I setup the automatic payment to the card? Before the statement date (I would think doing this would result in a 0% utilization rate). On/before the due date (this should have the utilization rate updated, but will there be residual interest?)

On a side note, does anyone see any holes in my strategy? Should I also try to keep my total utilization rate over that 1% as well (some store cards will remain at 0%). Should I close those store cards that will rarely be used?

I think the general concensus is you are way overthinking it. Allow a trivial balance to report on one or two cards and let the rest report zero; that will give you the best score bump.

Re: Maintaining low utilization rate with avoiding interest

Remedios — Wed, 28 Apr 2021 18:32:45 GMT

@Horseshoez wrote:
@Anonymous wrote:
Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.

This leads me to my question... I have a bill that is charged, a statement date, a due date and an utilization rate. When do I setup the automatic payment to the card? Before the statement date (I would think doing this would result in a 0% utilization rate). On/before the due date (this should have the utilization rate updated, but will there be residual interest?)

On a side note, does anyone see any holes in my strategy? Should I also try to keep my total utilization rate over that 1% as well (some store cards will remain at 0%). Should I close those store cards that will rarely be used?
I think the general concensus is you are way overthinking it. Allow a trivial balance to report on one or two cards and let the rest report zero; that will give you the best score bump.

That is not a general consensus.

OP is free to manage their cards however they see fit.

The fact it isn't for you (or me), doesn't mean it's not right for them.

Re: Maintaining low utilization rate with avoiding interest

simplynoir — Wed, 28 Apr 2021 18:38:09 GMT

@Anonymous wrote:
Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.

Just to be clear here because the way I am interpreting what you are discussing is maybe different so just wanting to make sure. If you want to use the AZEO method for maximizing your scores it just needs to be ONE card that carries the utilization/balance, your other cards can be paid off as you normally would do

Re: Maintaining low utilization rate with avoiding interest

Anonymous — Wed, 28 Apr 2021 18:52:03 GMT

@simplynoir wrote:
@Anonymous wrote:
Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.
Just to be clear here because the way I am interpreting what you are discussing is maybe different so just wanting to make sure. If you want to use the AZEO method for maximizing your scores it just needs to be ONE card that carries the utilization/balance, your other cards can be paid off as you normally would do

THIS I think answers my question... to maintain the best scoring for utilization, only 1 card needs to show usage, below 9%. I was under the impression it was "ALL" of the cards. Thanks for pointing me in the right direction.

Re: Maintaining low utilization rate with avoiding interest

Remedios — Wed, 28 Apr 2021 18:53:00 GMT

@Anonymous if you are trying to squeeze every last point, you need to pay your cards to $0.00 before the statement cuts, and like @simplynoir pointed out, leave a small balance on only one card.

If you pay them before the statement, biggest drawback is loss of float and time spent micromanaging.

Maybe try it for one month and see what kind of difference it makes for you.

Fico 8 isn't really that much sensitive to numbers of cards with balances, there are some points lost, but nothing like older scoring models, they love it.

Give it a try and see if it's worth it for you.

Re: Maintaining low utilization rate with avoiding interest

simplynoir — Wed, 28 Apr 2021 19:04:39 GMT

To ride off what @Remedios has said to me AZEO isn't really going to gain you much scoring wise at your current stats unless you're looking maximize your scores for getting a loan ike a mortgage or vehicle, or a future credit card application

I know some people when rebuilding they use AZEO to keep them honest since it has you keep on top of your finances. Promotes good habits essentially when using that method. I think if it helps you keep things organized then go for it but just need to keep in mind it isn't a bad thing if you let some cards report either

Re: Maintaining low utilization rate with avoiding interest

SouthJamaica — Wed, 28 Apr 2021 20:56:01 GMT

@Anonymous wrote:
Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.

This leads me to my question... I have a bill that is charged, a statement date, a due date and an utilization rate. When do I setup the automatic payment to the card? Before the statement date (I would think doing this would result in a 0% utilization rate). On/before the due date (this should have the utilization rate updated, but will there be residual interest?)

On a side note, does anyone see any holes in my strategy? Should I also try to keep my total utilization rate over that 1% as well (some store cards will remain at 0%). Should I close those store cards that will rarely be used?

If you want your revolving utilization to be super-optimized to the point that you will have no negative effect in any scoring model, the optimum formula is to have

-one bank card report a sub-$100 balance each month before paying it off and

-all other accounts report a zero balance.

This is the AZEO (all zero except one) method.

Re: Maintaining low utilization rate with avoiding interest

mgood — Wed, 28 Apr 2021 23:56:55 GMT

@Anonymous wrote:

Should I close those store cards that will rarely be used?

DO NOT close an account that isn't costing you anything. If there are annual fees or something, then it may be something you want to get rid of. Otherwise, use it a few times per year and pay it off before it charges you any interest, and leave it alone. They contribute to your average age of accounts and to your aggregate credit limit, both of which improve your scores.

An exception might be if you have so many old accounts and such a high aggregate credit limit that those cards are irrelevant and you're just trying to cull the herd to make life more simple.

Re: Maintaining low utilization rate with avoiding interest

Anonymous — Fri, 30 Apr 2021 14:21:06 GMT

Got it.. I've PIF 2 of the cards that have an annual fee, high interest rate and low limits. Called and closed those accounts. So far I've paid off all of my accounts with the exception of 3, which are ~14%-30% utilization rate, and my next targets. I expect a huge score bump over the next month as my overall utilization rate has dropped from ~40% to 4%.

My plan is to get all cards PIF, then use the one with the highest limit as my "gas" card or such to keep the monthly balance below 9%.

Re: Maintaining low utilization rate with avoiding interest

Horseshoez — Fri, 30 Apr 2021 14:44:57 GMT

@Anonymous wrote:
Got it.. I've PIF 2 of the cards that have an annual fee, high interest rate and low limits. Called and closed those accounts. So far I've paid off all of my accounts with the exception of 3, which are ~14%-30% utilization rate, and my next targets. I expect a huge score bump over the next month as my overall utilization rate has dropped from ~40% to 4%.

My plan is to get all cards PIF, then use the one with the highest limit as my "gas" card or such to keep the monthly balance below 9%.

That sounds like a pretty good plan; the only suggestion I might make is to keep the card you allow to report a balance to less than a 5% utilization at reporting time; I've noticed if I let one card rise up above that, even if it is below 9%, I get a point ding. What I've also noticed is if I have two cards reporting below 5% utilization, there is no point difference than if only one is reporting. As always, YMMV.

Re: Maintaining low utilization rate with avoiding interest

Anonymous — Thu, 13 May 2021 09:59:59 GMT

Owe $1 on 1 card. Works every time!

Re: Maintaining low utilization rate with avoiding interest

Remedios — Thu, 13 May 2021 22:46:39 GMT

@Anonymous wrote:
Owe $1 on 1 card. Works every time!

Do you mind explaining that a bit further?

There is a very good reason why no one purposefully does that, so I'm rather curious.

But yeah, it doesn't work at all, unless one likes losing points while trying to gain points.

Re: Maintaining low utilization rate with avoiding interest

grower1 — Fri, 14 May 2021 02:02:53 GMT

I let $10 report on one card each month, rinse & repeat. It's 0% but not $0.