topic Re: Credit Card Utilization in General Credit Topics

Credit Card Utilization

Anovice — Fri, 07 Apr 2023 14:18:52 GMT

Prior to the pandemic, my FICA credit score was always about 825. During the pandemic, Capital One decided to cut my credit limit from $10,000 to $5,000. Unfortunately, I used this credit card very little, which I am sure is the reason that they cut my credit limit in half. The only other credit card that I have and is the one that I use, is a Costco Visa. Since the pandemic, my credit score has been 797 plus or minus a few points.

I would like to get my credit score back to about 825. The only way I can see how to do that is to increase my credit limit, which would lower my utilization, becuse my spending has not increased. Even this I do not understand, because with my lowered credit limit, I am still under 30% utilization (barely). If increasing my credit limit is the answer to increasing my credit score, I would rather not go back to Capital One to increase my credit limit. Is an answer to apply for another credit card?

Re: Credit Card Utilization

CH-7-Mission-Accomplished — Fri, 07 Apr 2023 14:31:11 GMT

@Anovice wrote:
Prior to the pandemic, my FICA credit score was always about 825. During the pandemic, Capital One decided to cut my credit limit from $10,000 to $5,000. Unfortunately, I used this credit card very little, which I am sure is the reason that they cut my credit limit in half. The only other credit card that I have and is the one that I use, is a Costco Visa. Since the pandemic, my credit score has been 797 plus or minus a few points.

I would like to get my credit score back to about 825. The only way I can see how to do that is to increase my credit limit, which would lower my utilization, becuse my spending has not increased. Even this I do not understand, because with my lowered credit limit, I am still under 30% utilization (barely). If increasing my credit limit is the answer to increasing my credit score, I would rather not go back to Capital One to increase my credit limit. Is an answer to apply for another credit card?

A 797 FICO score is outstanding. There is virtually no difference in the credit terms you would be offered with a 797 versus an 825.

I get that it's pride. I like my scores at 850 but that's just for bragging rights.

If you only have two credit cards and you open a new one, you would likely take a 20+ point hit to your 797 score.

Honestly you shouldn't have any utilization on cards with those two lenders unless they were zero interest rate balance transfers. If it means this much to you, just pay down that utilization and you will pop back to 825. 30% utilization is not good. It's better than 40% and worse than 20%. The 30% utilization is a myth that refuses to go away. The best utilization rate as reported to the credit bureaus monthly would be 1% to 3% aggregate. Many of us just let $5 report on one card each month.

You remind me of me when I was in college. I always had to have a 4.0 GPA. I was devastated when I got something less. I graduated with a 3.8% GPA which was good enough for magna **bleep** laude, but that missing 0.2% still haunts me. It's an OCD issue.

Re: Credit Card Utilization

CH-7-Mission-Accomplished — Fri, 07 Apr 2023 14:33:36 GMT

I just noted that myFICO bleeped the c-u-m in my honors degree. How silly. I mean it's Latin.

Re: Credit Card Utilization

Horseshoez — Fri, 07 Apr 2023 14:34:18 GMT

@Anovice wrote:
Prior to the pandemic, my FICA credit score was always about 825. During the pandemic, Capital One decided to cut my credit limit from $10,000 to $5,000. Unfortunately, I used this credit card very little, which I am sure is the reason that they cut my credit limit in half. The only other credit card that I have and is the one that I use, is a Costco Visa. Since the pandemic, my credit score has been 797 plus or minus a few points.

I would like to get my credit score back to about 825. The only way I can see how to do that is to increase my credit limit, which would lower my utilization, becuse my spending has not increased. Even this I do not understand, because with my lowered credit limit, I am still under 30% utilization (barely). If increasing my credit limit is the answer to increasing my credit score, I would rather not go back to Capital One to increase my credit limit. Is an answer to apply for another credit card?

A fair amount to unpack here, so a few comments (some of which are at cross purposes):

I don't think a higher total credit limit will boost your scores all that much, and almost certainly not back up to 825
Adding another card will actually hurt your scores a bit what with the hard pull and the recalculation of your AAoA
The collective here at myFICO believe for optimal scores you need the following:
- At least three revolving credit cards
- Should allow only one to report a trivial monthly charge (say under $100)
If I were in your shoes I'd do the following:
- Pay down your balance(s) to under 9% of your total credit limit (this will give you an immediate boost without doing anything else)
- If you have more than one card reporting balances, then pay all but one down to zero and then pay the remaining one down to under 9%, or better still, under $100
- Request a CLI with CapOne (they do CLIs with a soft pull, so not impact on your scores)
- Apply for a third credit card (assuming you don't already have three), yes, this will impact your scores for a while, but they will recover
- If you don't have a mortgage, a car loan, or any other type of installment loan, apply for a Secured Savings Loan (SSL); PenFed and NFCU both offer such loans. Once opened, pay said SSL down to under 9% and let it sit.

Re: Credit Card Utilization

Thomas_Thumb — Fri, 07 Apr 2023 15:42:08 GMT

@Anovice wrote:
Prior to the pandemic, my FICA credit score was always about 825. During the pandemic, Capital One decided to cut my credit limit from $10,000 to $5,000. Unfortunately, I used this credit card very little, which I am sure is the reason that they cut my credit limit in half. The only other credit card that I have and is the one that I use, is a Costco Visa. Since the pandemic, my credit score has been 797 plus or minus a few points.

I would like to get my credit score back to about 825. The only way I can see how to do that is to increase my credit limit, which would lower my utilization, becuse my spending has not increased. Even this I do not understand, because with my lowered credit limit, I am still under 30% utilization (barely). If increasing my credit limit is the answer to increasing my credit score, I would rather not go back to Capital One to increase my credit limit. Is an answer to apply for another credit card?

Key point is to maintain credit utilization under 9%. There are many ways to do this:

1. Reduce reported balance on statements by making early payments before statement cuts. This may require you to adjust spending habits to ensure no last minute charges show up before statement cuts. It also means double payments - one before statement cuts and then a 2nd after cut date to PIF.

2. Swallow your pride and ask for a $5k CLI. This may trigger a HP but still worth it in the long run. I had a card CL dropped from $20k to $13k due to non use back in 2009 or 2010. Not happy about it. Started using card again. Later asked for a CLI and they bumped CL to $18k.

3. Get another card like Discover where CLIs every 6 months are possible via on-line request without HPs.

I'd suggest a combination of 2 and 3. Your current aggregate CL is too constraining IMO. Impliment #1 if you feel a need to maximize score at some point.

Given your credit score, I'd forego a SSL. Really no value add in complicating your situation with a token loan. Get a loan when you need one for financial reasons.

Re: Credit Card Utilization

Anovice — Fri, 07 Apr 2023 15:53:47 GMT

Thank you for your posts.

I only have the two credit cards. I receive my Costco Visa statement about the 10th of each month. I pay it all the next day. I receive my Capital One statement around the 15th. I pay it all the next day.

The only thing that I could do differently, is that I have a monthly recurring $361 bill that I put on my Captial One Visa. This bill arrives early in each month, it is not due until the 25th of each month, but I pay it immedicately upon receipt. This means that it might be showing balances for both credit cards at some point in time during the month. What I could do is continue paying my Costco Visa around the 10th of each month but not put the $361 bill on my Capital One Credit card until a few days after I pay my Costco Visa.

If addiing another credit card will hurt my credit score, certainly, I do not want that. Or, should I apply for another credit card because I ony have two? I do not know what a CLI is, but I really do not like Capital One and would rather not do more with them if possible. My mortgage is paid off, I paid cash for my car, and I do not have an installment loan.

It seems to boil down to adjust how I use my Capital One credit card as described above, request a CLI whatever that is, apply for another credit card or do nothing.

Thoughts?

Re: Credit Card Utilization

Horseshoez — Fri, 07 Apr 2023 16:02:41 GMT

@Anovice wrote:
Thank you for your posts.

I only have the two credit cards. I receive my Costco Visa statement about the 10th of each month. I pay it all the next day. I receive my Capital One statement around the 15th. I pay it all the next day.

The only thing that I could do differently, is that I have a monthly recurring $361 bill that I put on my Captial One Visa. This bill arrives early in each month, it is not due until the 25th of each month, but I pay it immedicately upon receipt. This means that it might be showing balances for both credit cards at some point in time during the month. What I could do is continue paying my Costco Visa around the 10th of each month but not put the $361 bill on my Capital One Credit card until a few days after I pay my Costco Visa.

If addiing another credit card will hurt my credit score, certainly, I do not want that. Or, should I apply for another credit card because I ony have two? I do not know what a CLI is, but I really do not like Capital One and would rather not do more with them if possible. My mortgage is paid off, I paid cash for my car, and I do not have an installment loan.

It seems to boil down to adjust how I use my Capital One credit card as described above, request a CLI whatever that is, apply for another credit card or do nothing.

Thoughts?

Comments:

There is one other thing you can do (which I do); you look at your balance online and pay it in full before the statement date. That way your statements report either zero, or a small number of charges which post between your payment and the statement.
A "CLI" is a Credit Line Increase; there are typically two types, "auto-CLI" where your lender bumps up your limit without you asking, and a requested CLI where you ask for a higher limit.
What don't you like about your CapOne card? I have two and really like them.
As has been suggested, opening up a third card will temporarily depress your scores.
Given you have no installments, opening up an SSL and then paying it down under 9% will help your almost immediately

Re: Credit Card Utilization

WildestDreams — Fri, 07 Apr 2023 16:10:42 GMT

@Anovice wrote:
Thank you for your posts.

I only have the two credit cards. I receive my Costco Visa statement about the 10th of each month. I pay it all the next day. I receive my Capital One statement around the 15th. I pay it all the next day.

The only thing that I could do differently, is that I have a monthly recurring $361 bill that I put on my Captial One Visa. This bill arrives early in each month, it is not due until the 25th of each month, but I pay it immedicately upon receipt. This means that it might be showing balances for both credit cards at some point in time during the month. What I could do is continue paying my Costco Visa around the 10th of each month but not put the $361 bill on my Capital One Credit card until a few days after I pay my Costco Visa.

If addiing another credit card will hurt my credit score, certainly, I do not want that. Or, should I apply for another credit card because I ony have two? I do not know what a CLI is, but I really do not like Capital One and would rather not do more with them if possible. My mortgage is paid off, I paid cash for my car, and I do not have an installment loan.

It seems to boil down to adjust how I use my Capital One credit card as described above, request a CLI whatever that is, apply for another credit card or do nothing.

Thoughts?

I agree that getting the utlization down will help, ive seen it work! also

My understanding is a SSL (savings secured loan) the takeout then pay down most of it right away let the rest pay over 3 years hack would help you since you do not have any installments reporting, BUT I don't know how much since your score is already very good.. The amazing advice on this forum has taught me that for optimal scoring you do need an installment loan not sure if that goes out the window when your scores are already high though...maybe one of the experts can weigh in on that specifically?

Re: Credit Card Utilization

Thomas_Thumb — Fri, 07 Apr 2023 16:29:26 GMT

Getting a 3rd card may drop your score in the short run 15 to 20 points. This happens because you are temporarily placed on a new accounts scorecard. However, after 12 months that penalty will be gone and your score will have greater growth potential than before.

Currently you have a thin file. As such it is subject to greater swings in credit score. Adding an account can add stability in addition to increasing score. Better to do this early on so the account can benefit from aging over time.

Too few accounts puts you in a vulnerable position. A credit card issuer may reduce your credit limit or even close your account? Then what? Having 3 accounts helps mitigate the impact of adverse action on a single account.

Re: Credit Card Utilization

Anovice — Fri, 07 Apr 2023 16:44:57 GMT

Should I call Capital One and ask them if they will do an auto-CLI? If they won't and I ask for a higher limit, does this hurt my credit score?
I have never been late on paying a bill in over 50 years. I understand why Capital One's computers cut my credit score in half, but I do not like it. Also, I like buying American and would rather talk with customer support here than in Panama of the Philippines.
If I go the route the another credit card, in addition to Discovery, can someone receommend a few? I do not care what the interest is because I pay immediately upon receiving the statement.
If I get another credit card how long will this impact your scores for?
Thomas_Thumb said " It also means double payments - one before statement cuts and then a 2nd after cut date to PIF." By example, does this mean that if my statement says $500, then I pay $500 before the statement cuts and $500 after the statement cuts? What does PIF mean?

Where I am driving is I am thinking of purchasing a vacation home next year where I will need a mortgage and would want the lowest interest rate possible.

Re: Credit Card Utilization

Thomas_Thumb — Fri, 07 Apr 2023 17:05:48 GMT

It means for example:

If you have $1000 worth of charges on a card with a $5000 limit your statement will report $1000 which represents a utilization of 20%.

To reduce utilization, pay $900 before statement cuts so only $100 reports on the statement. Then Pay in full (PIF) the $100 statement balance. In effect you are now making 2 payments each billing cycle instead of one. What's the benefit? Your calculated utilization used in Fico scoring has been lowered to 2% from 20%.

Side note: It is important to have one of your 2 cards report a "small" balance. If both cards report $0 balance, your score will be penalized. The penalty is often called the "all zeros" penalty.

Re: Credit Card Utilization

Horseshoez — Fri, 07 Apr 2023 17:00:24 GMT

@Anovice wrote:
Should I call Capital One and ask them if they will do an auto-CLI? If they won't and I ask for a higher limit, does this hurt my credit score?
I have never been late on paying a bill in over 50 years. I understand why Capital One's computers cut my credit score in half, but I do not like it. Also, I like buying American and would rather talk with customer support here than in Panama of the Philippines.
If I go the route the another credit card, in addition to Discovery, can someone receommend a few? I do not care what the interest is because I pay immediately upon receiving the statement.
If I get another credit card how long will this impact your scores for?
Thomas_Thumb said " It also means double payments - one before statement cuts and then a 2nd after cut date to PIF." By example, does this mean that if my statement says $500, then I pay $500 before the statement cuts and $500 after the statement cuts? What does PIF mean?
Where I am driving is I am thinking of purchasing a vacation home next year where I will need a mortgage and would want the lowest interest rate possible.

Comments:

You cannot request an "auto-CLI"; such CLIs are just that, automatic and have not been requested.
You can go onto the CapOne web site and request a credit line increase; it matters not whether you are approved for an increase or not, you will only be hit with a soft pull and this will in no way impact your credit score.
From my perspective, your best bet would be to join PenFed FCU, open up a savings account (minimum deposit $5.00), then open an SSL, and a credit card; all three can be accomplished with a single hard pull.

Re: Credit Card Utilization

Anovice — Sun, 09 Apr 2023 10:38:15 GMT

Thank you for all the great posts!

I think that I have decided the best thing that I can do is get a third credit card. This is solve the utilization problem, but more so, what Thomas_Thumb posted really resonates. I have a thin file and am vulnerable. What happends is CapitalOne further reduces my credit limit, my Costco Citi Visa does the same or either one decides to close my account.

Now the question becomes where do I go and what should I do. Horsehoez suggested that I go to PenFed FCU, open up a savings account (minimum deposit $5.00), then open an SSL, and a credit card. Is a Secured Savings Loan necessary? I can get my utilization under 9% without a loan. If it is necessary to take out a SSL, Horsehoez suggested that I can join PenFed FCU, open up a savings account (minimum deposit $5.00), then open an SSL, and apply for a credit card with a single hard pull. How do I go about doing this? Or, would something like a Discover credit card be better for me? I pay my Visa bills the day that I receive my monthly statements from CapitalOne and Citi.

Re: Credit Card Utilization

SouthJamaica — Sun, 09 Apr 2023 11:20:11 GMT

@Anovice wrote:
Thank you for all the great posts!

I think that I have decided the best thing that I can do is get a third credit card. This is solve the utilization problem, but more so, what Thomas_Thumb posted really resonates. I have a thin file and am vulnerable. What happends is CapitalOne further reduces my credit limit, my Costco Citi Visa does the same or either one decides to close my account.

Now the question becomes where do I go and what should I do. Horsehoez suggested that I go to PenFed FCU, open up a savings account (minimum deposit $5.00), then open an SSL, and a credit card. Is a Secured Savings Loan necessary? I can get my utilization under 9% without a loan. If it is necessary to take out a SSL, Horsehoez suggested that I can join PenFed FCU, open up a savings account (minimum deposit $5.00), then open an SSL, and apply for a credit card with a single hard pull. How do I go about doing this? Or, would something like a Discover credit card be better for me? I pay my Visa bills the day that I receive my monthly statements from CapitalOne and Citi.

1. Get a credit card you would like to have. You might want to look into regional credit unions and see what they have that interests you.

2. You need to understand that utilization for FICO score purposes is not based on usage, but on reported balances. Here's how this works with a card for which the reported balance is the statement balance:

- A and B each have 2 cards with a $5000 credit limit, and each spends $2500 a month on the card.

- A pays the cards off the day before the statement cuts, B pays them off the day after the statement cuts.

- A has 0% utilization; B has 50% utilization.

Re: Credit Card Utilization

Horseshoez — Sun, 09 Apr 2023 13:11:09 GMT

Using the last year of my EX FICO 8 scores to help illustrate various points made above including @SouthJamaica's most recent point:

May 2022:
- No hard pulls for two years
- One $3,000 SSL with an outstanding balance of about 8%
- Three credit cards (all at least a year old) with a total combined limit of about $18,000
- One credit card with a balance of less than $100.
- I had a score of 837
I then applied for a new credit card one hard pull, a reduced AAoA, and a starting limit of a whopping $2,000; my score dropped to 812.
In August I was granted a CapOne CLI of $1,500; no change to my scores.
In October a few things happened:
- I bought a new car (my first in over 20 years)
- The dealership and Toyota Finance both hit me with a hard pull
- I started the loan with a balance of about $38,500 (and by definition a 100% outstanding balance)
- I closed my PenFed SSL
- My score dropped to 765
In December a few more things happened:
- I opened two new bank accounts with Chase and while I was at it, the banking associate asked me if I wanted a credit card as well; I didn't have a travel related card at the time so I asked for a Chase Sapphire Preferred; bingo, approved with a credit limit of $11,700.
- My total revolving credit limit was increased to about $33,000
- I took another hard pull, totalling 4 for the previous 12 months
- My score dropped to 734, totalling a 101 point drop between April and December
By February of this year my score had inched back up to 754, no explanation as to why, but possibly because of two auto-CLIs, one from CapOne and another from TDBank, bringing my total revolving limit up to about $38,000
In March:
- My payment for one of my cards posted the day after the statement cut which meant a reported balance of about 16% for that one card; my score dropped to 738
- A few days later the zero balance on that card was reported and that kinda-sorta helped my score as I went from a relatively high/atypical (for me) utilization on one card to all zero which of course isn't optimal either; my score bumped up to 748.
In April I ended up showing AZEO with one of my five cards reporting a trivial balance of about $50; my scores bumped up 16 points to 764.

I told you all of that to say this, opening both a third credit card and an SSL will help your scores in the long run, but doing so may well depress your scores for the next few months. That and as always in the credit score game, your mileage may vary.

Re: Credit Card Utilization

CH-7-Mission-Accomplished — Sun, 09 Apr 2023 14:57:36 GMT

@Horseshoez wrote:
@Anovice wrote:
Prior to the pandemic, my FICA credit score was always about 825. During the pandemic, Capital One decided to cut my credit limit from $10,000 to $5,000. Unfortunately, I used this credit card very little, which I am sure is the reason that they cut my credit limit in half. The only other credit card that I have and is the one that I use, is a Costco Visa. Since the pandemic, my credit score has been 797 plus or minus a few points.

I would like to get my credit score back to about 825. The only way I can see how to do that is to increase my credit limit, which would lower my utilization, becuse my spending has not increased. Even this I do not understand, because with my lowered credit limit, I am still under 30% utilization (barely). If increasing my credit limit is the answer to increasing my credit score, I would rather not go back to Capital One to increase my credit limit. Is an answer to apply for another credit card?
A fair amount to unpack here, so a few comments (some of which are at cross purposes):
I don't think a higher total credit limit will boost your scores all that much, and almost certainly not back up to 825
Adding another card will actually hurt your scores a bit what with the hard pull and the recalculation of your AAoA
The collective here at myFICO believe for optimal scores you need the following:
At least three revolving credit cards
Should allow only one to report a trivial monthly charge (say under $100)
If I were in your shoes I'd do the following:
Pay down your balance(s) to under 9% of your total credit limit (this will give you an immediate boost without doing anything else)
If you have more than one card reporting balances, then pay all but one down to zero and then pay the remaining one down to under 9%, or better still, under $100
Request a CLI with CapOne (they do CLIs with a soft pull, so not impact on your scores)
Apply for a third credit card (assuming you don't already have three), yes, this will impact your scores for a while, but they will recover
If you don't have a mortgage, a car loan, or any other type of installment loan, apply for a Secured Savings Loan (SSL); PenFed and NFCU both offer such loans. Once opened, pay said SSL down to under 9% and let it sit.

Horseshoez, can you confirm that the Penfed SSL works the same as the Navy Fed SSL, i.e., you can pay down the SSL to 8.9% right away and the next payment due date will be pushed out far into the future as it is with Navy? I have read conflicting reports and I would like to ask somebody who has actually had a Penfed SSL. Thanks.

Re: Credit Card Utilization

Thomas_Thumb — Sun, 09 Apr 2023 16:06:24 GMT

In post 10 the OP mentions having over 50 years of ontime payment history. I suspect the OP receives statements and then pays statement balances. Scores have been maintained over 800 most of the time. Main concern is the drop in credit limit resulting in a 10 to 20 point drop in score due to higher reported utilization.

Considering the OP's situation simply adding a 3rd card and increasing credit limits on existing cards will suffice. This should do the trick even if the OP wants to maintain a 50 year practice of allowing transactions to post on statements and simply paying statement amounts.

That being said, I would encourage the OP to make some early payments to lower statement balance in months where a card is heavily used.

Re: Credit Card Utilization

Horseshoez — Sun, 09 Apr 2023 16:31:13 GMT

@CH-7-Mission-Accomplished wrote:
Horseshoez, can you confirm that the Penfed SSL works the same as the Navy Fed SSL, i.e., you can pay down the SSL to 8.9% right away and the next payment due date will be pushed out far into the future as it is with Navy? I have read conflicting reports and I would like to ask somebody who has actually had a Penfed SSL. Thanks.

Yes, confirmed. When I payed mine down under 9% the "Next Due Date" got pushed out over 2.5 years into the future.

Re: Credit Card Utilization

Anovice — Sun, 09 Apr 2023 16:36:42 GMT

Thomas_Thumb, you are spot on with everything that you said, and I will make some early payments to lower statement balance in months where a card is heavily used. Alternatively, if I have a larger expenditure, I could always pay with check. What tripped me up recently, is that I put my yearly auto insurance on my Citi Visa. In retrospect, I should have paid it from "Pay Bills" from my checking account.

If I can get some thoughts on a credit card to get, that would be greatly appreciated. Again, the interest rate is of no moment because I pay 100% as soon as I receive my statement.

Re: Credit Card Utilization

Thomas_Thumb — Sun, 09 Apr 2023 19:43:48 GMT

I put insurance and medical bills on credit cards. It provides an opportunity to get some cash back bonus $$. Recommend you continue paying by card if it has cash back bonus.

Just call the # on your credit card and make an early payment by phone from your checking account. Speak to a customer service rep to set it up. Once done, future payments can be made using the automated pay by phone system. You can elect to pay total balance or some lesser amount. Ultimately you can also pay statement balances by phone - or use "pay bills" on-line

I have 5 credit cards. One is a Discover card which I have used since 1989. I think it would be a good option for you. Decent cash back and generous credit limits. Minimal hassle to apply and no need to join anything.

There are other cards with better cash back options. Perhaps other posters can provide a short list.

FYI - try to maintain reported balance under 29% of the cards credit limit and aggregate utilization (all cards combined) under 9% to avoid "large" swings in credit score.

2 card example:

A. Card 1 has a CL of $5000 and reports $1250. Card utilization is 25%

B. Card 2 has a CL of $4000 and reports $800. Card utilization is 20%.

Each card is under 29% which meets the individual card criteria. However in aggregate there are $2050 in charges on a combined $9000 credit limit. That is above 9% aggregate threshold which would be $810 in reported charges. Fico looks at both individual and aggregate utilization seperately.

Now if $0 were reported on card 1 and the same $800 on card 2, aggregate utilization is now below 9% ($810) and individual card utilizations are both below 29% (0% and 20%).