topic Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repayment in General Credit Topics

Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repayment

msmjj01 — Thu, 29 Aug 2024 02:50:30 GMT

I need some advice. I was blessed to have had good credit years ago that enabled me and my family to have many rewards cards. I collected so much and have about 20 cards.

I have a total credit line of $200,000 spread across about 20 credit cards, with an outstanding debt of $80,000. I am currently making minimum payments and utilized balance transfer. I still have these pending loans. All on personal, not on Businesses credit. So yes, my credit is affected. Additionally, I use around $60,000 on these cards monthly (including business expenses) and pay it off before the statement closes with about 8 cards mainly Bofa, Chase, Citi, Barclays, Amex.

I wanted to ask if paying off the $60,000 monthly before the statement closes positively impacts my credit score. I am currently struggling with my credit score, which has dropped to between 540 and 600 from 850, and some of my credit card issuers have lowered my credit limits due to the high balances being reported. I get the 30% ratio I have exceeded.

I understand the importance of paying down my debt, but I am going through a tough financial period helping family/relatives during their darkest times as well. My goal is to continue building my credit. Would it be more effective to keep using my cards and paying them off before the statement closes, demonstrating consistent use and full repayment? Or should I focus solely on paying down the outstanding debt without further card usage, given that I am being charged interest and considered a risk?

I appreciate any advice you can offer.

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

coldfusion — Thu, 29 Aug 2024 11:12:01 GMT

@msmjj01 wrote:

I wanted to ask if paying off the $60,000 monthly before the statement closes positively impacts my credit score.

Not yet suitably caffeinated this morning so I hope this makes sense.

If you're incurring $60K in new charges and paying $60K toward the balances in the same billing cycle there wouldn't be a net change in your overall reported debt so I don't think it would lead to positive impact to your FICO scores.

You're already getting balance chased which means that your current creditors have already seen your current financial status as having raised red flags and you're at the stage where it's become a real possibility that you're either going to start seeing cards closed as each one reaches a $0 balance or if an individual creditor gets nervous enough they'll just close a card with a balance outstanding. While it is commendable that you're trying to help family members who are themselves in distress I'll point out a few things:

a) You aren't demonstrating full repayment, you're demonstrating that you're struggling to keep your head above water by only making minimum payments against legacy debt/reported balances while paying off new charges. That isn't sustainable indefinitely.

b) One of the things I was taught years ago in lifeguard training was when and how to extricate myself when someone I'm trying to save grabs onto me and risks taking me with them. While a drowning victim is always a tragedy there is sometimes a decision point where you have to choose if you're going to save yourself as ending up with 2 drowning victims is an even bigger tragedy.

c) there is the meme about not lighting yourself on fire to keep someone else warm, it can be seen as being heartless but reflects a reality

tl;dr prioritize paying down your debts

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

Thomas_Thumb — Fri, 30 Aug 2024 02:03:30 GMT

It sounds to me like you have a debt steady at $80k and an aggregate CL of $200k. On top of the $80k you incur monthly charges of $60k which gets paid off before statement cut date. Then you rinse and repeat.

So, reported aggregate balance now is $80k => 40% utilization. Now, if the $60k monthly expenses is allowed to report on statements, balance increases to $140k. This would cause aggregate UT to increase to 70%. The walls would come crumbling down and your CLs would be balance chased severly. Accounts may get closed with balances preventing further spend.

Going from 40% to 70% reported would definitely hurt. Lastly, Fico also looks at aggregate balance in $ as a scoring factor.

Given your current scores, you must have some derogatories, such as late payments, on file. Utilization is given less weight on dirty scorecards but is still a factor in score. So, the paydowns before statement date are beneficial to score.

Best financially to avoid new charges and pay down debt. Try starting at 3x the minimum monthly payment on each card and adjust from there. Pay off highest apr cards 1st. Watch out for new rounds of balance chasing.

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

FicoMike0 — Thu, 29 Aug 2024 14:46:33 GMT

Your post isn't entirely clear to me. Is the $80000 debt credit card, or other loans? You mention pending loans, what are those?

You can get more meaningful advice by providing more detail.

In answer to your question

"I wanted to ask if paying off the $60,000 monthly before the statement closes positively impacts my credit score."

Its certainly better than not paying it, but it's not helping vs not making the charges in the first place. Is the $60000 yours? If you're churning money that's not actually yours, id worry about bankruptcy implications.

You indicate you are being balance chased and your scores are between 540 and 600. You're in a bad situation, as your cl is decreased, you utilization grows in a downward spiral. As far as struggling with credit score, you've lost the struggle.

Without specifics, it's hard to suggest anything other than paying down the debt.

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

msmjj01 — Thu, 29 Aug 2024 23:57:08 GMT

Sorry for the confusion.

Out of a total credit card debt of $200k, around $60k is outstanding. All balances are being paid off monthly on time, with no missed payments or derogatory marks. However, my credit score is currently low due to the high balances.

My monthly spending across all cards is $60-70k, which I pay in full exactly three weeks after each charge is made, even before the statement closes. So, despite paying off the $70k monthly, there is still a large remaining balance. This balance came from a loan I took out through a Citi card and a balance transfer offer, which I maxed out for a family member's surgery and treatments. I'm wondering if paying in full like this has any positive impact.

I'm worried because my credit matters to me, and I want to find a way to pay all this off, clean up my credit, and eventually be able to open more cards in the future.

Sorry, I'm not an expert on this, but I appreciate your help and advice.

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

msmjj01 — Fri, 30 Aug 2024 00:27:13 GMT

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

FicoMike0 — Fri, 30 Aug 2024 03:05:11 GMT

I think you've gotten several opinions that running a lot of spend through accounts isn't helping. I suppose the elephant in the room is, what are you spending so much on? Couldn't you cut back $10000 a month and pay off the $80000 in short order?

Do you own a mansion with lots of staff? I was at the Biltmore this year, I can see how it could add up, roflol!

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

msmjj01 — Fri, 30 Aug 2024 03:40:43 GMT

The monthly is on business so it's not personal purchases so it has to continue but the loans were all personal. So what's the best way to remedy this? Obviously paying monthly but I hope someone has something yo recommend

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

FicoMike0 — Fri, 30 Aug 2024 13:47:48 GMT

If you list each account with cl and balance along with your monthly pay down budget, you'll get ideas as to where best to apply that budget.

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

SouthJamaica — Fri, 30 Aug 2024 19:23:22 GMT

@msmjj01 wrote:
I need some advice. I was blessed to have had good credit years ago that enabled me and my family to have many rewards cards. I collected so much and have about 20 cards.

I have a total credit line of $200,000 spread across about 20 credit cards, with an outstanding debt of $80,000. I am currently making minimum payments and utilized balance transfer. I still have these pending loans. All on personal, not on Businesses credit. So yes, my credit is affected. Additionally, I use around $60,000 on these cards monthly (including business expenses) and pay it off before the statement closes with about 8 cards mainly Bofa, Chase, Citi, Barclays, Amex.

I wanted to ask if paying off the $60,000 monthly before the statement closes positively impacts my credit score. I am currently struggling with my credit score, which has dropped to between 540 and 600 from 850, and some of my credit card issuers have lowered my credit limits due to the high balances being reported. I get the 30% ratio I have exceeded.

I understand the importance of paying down my debt, but I am going through a tough financial period helping family/relatives during their darkest times as well. My goal is to continue building my credit. Would it be more effective to keep using my cards and paying them off before the statement closes, demonstrating consistent use and full repayment? Or should I focus solely on paying down the outstanding debt without further card usage, given that I am being charged interest and considered a risk?

I appreciate any advice you can offer.

Welcome to the forum.

Definitely it will help to pay before rather than after statements close, as that will reduce your utilization, since on most cards the statement balance is the reported balance.

In view of your tenuous position with some lenders, it certainly helps to pay things down and to use the cards less, rather than more.

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

MySunrise271 — Fri, 30 Aug 2024 19:40:38 GMT

@msmjj01 wrote:

Sorry for the confusion.
Out of a total credit card debt of $200k, around $60k is outstanding. All balances are being paid off monthly on time, with no missed payments or derogatory marks. However, my credit score is currently low due to the high balances.
My monthly spending across all cards is $60-70k, which I pay in full exactly three weeks after each charge is made, even before the statement closes. So, despite paying off the $70k monthly, there is still a large remaining balance. This balance came from a loan I took out through a Citi card and a balance transfer offer, which I maxed out for a family member's surgery and treatments. I'm wondering if paying in full like this has any positive impact.
Most medical bills can be put on a payment plan through the hopsiptial and or provider. They also have financial hardship programs you may be qualified for. This generally much better option to try first rather than using a credit card. That said, it's also ideal to use only one offer for one event at one time on a Citi credit card (or other lender). This keeps the interest terms simple to keep up with, as each offer will have a different term and they will compound on each other if multiple offers are used on one card. If you are able to, I suggest you move any current monthly spend either to a credit card with a $0 balance that you can easily PIF each month, or move to cash spending for those expenses. I think @coldfusion and others have given good takeaways for a plan forward.

I'm worried because my credit matters to me, and I want to find a way to pay all this off, clean up my credit, and eventually be able to open more cards in the future.
Sorry, I'm not an expert on this, but I appreciate your help and advice.

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

KatzNDawgs — Fri, 30 Aug 2024 21:09:43 GMT

@msmjj01 wrote:

Sorry for the confusion.
Out of a total credit card debt of $200k, around $60k is outstanding. All balances are being paid off monthly on time, with no missed payments or derogatory marks. However, my credit score is currently low due to the high balances.
My monthly spending across all cards is $60-70k, which I pay in full exactly three weeks after each charge is made, even before the statement closes. So, despite paying off the $70k monthly, there is still a large remaining balance. This balance came from a loan I took out through a Citi card and a balance transfer offer, which I maxed out for a family member's surgery and treatments. I'm wondering if paying in full like this has any positive impact.
I'm worried because my credit matters to me, and I want to find a way to pay all this off, clean up my credit, and eventually be able to open more cards in the future.
Sorry, I'm not an expert on this, but I appreciate your help and advice.

Please clarify. You have CL across 20 cards of 200k. You spend monthly 60-70k and pay that 60-70k spend off completely before statement date. That should give 0% util reported. However you mention some large BT(s) to a credit card that doesn't seem included in the above calculations - please let us know what the total owed vs CL is for this that is *not* paid off monthly.

In addition, a score of below 600 sounds like it inidcates issues other than %util. Do you have any other derogs like lates, collections, etc? In general paying off as much as possible is what you want to aim for, but with more details we may be able to give better specific advice.

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

msmjj01 — Fri, 30 Aug 2024 22:36:37 GMT

No other issue or derog or antrging

in time monthly minimum on loans

CITI - balance transfer offer 25k

CITI - balance transfer offer 15k

CITI - loan 24k

Barclays - balance transfer 10k

AU - balance transfer from my oartners - 16k

everything else gets paid off in full

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

Thomas_Thumb — Fri, 30 Aug 2024 23:33:15 GMT

Score aside, you absolutely need to not mingle business and personal expenses on the same cards. Are all personal expenses/debt on different cards from business expenses?

A potential issue for the OP is putting businesses on cards that carry personal debt. Debt carryover means high apr interest rates. The monthly businesses would crank up the average monthly balance even though paid off before statement cut date. In that situation the customary business that are paid every month are hit with high interest charges.

Business charges need to be on dedicated cards that are PIF. Not good if the business is having to absorb unwarranted apr fees.

Re: Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repaym

FicoMike0 — Sun, 01 Sep 2024 18:12:07 GMT

You list some balances, but without cl, not much help. You also mentioned being balance chased. That's a really bad sign.

It looks like your agg util is about 40%. I think there is a break point at <39%, getting under might help. As far as individual util, you want to reduce the highest. Since you're being balance chased, that number is likely close to 100%. Unless you can pif that account, not much you can do. If you have an account that's not being chased, you might save it by reducing its balance.

I hate to say it, but you seem to have fallen over the ledge. Your score is low because of util. You might lower util. with more credit, which you can't get, because your score is low.a

you might contact the lenders about hardship plans. If they lower the interest, you could put more on the principal.