Credit Utilization

[Anonymous]

Hi all,

Happy Holidays everyone!  I'm very new to using credit, in fact I just got my first credit card EVER about a month ago.  I was approved for the CapOne Quicksilver with a $5000 limit.   I never thought I was going to get such a high limit right off the bat like that!  CapOne recently reported to the credit bureaus for the first time and I saw a significant bump in my score (32pts according to CK, I have no idea what my real FICO scores look like just yet).  I'm so excited to finally start building up my credit, after a VERY late start.  I have the members on the forums here to thank for talking me out of my anxiety around credit and give me the confidence boost I needed to finally take the jump and apply!

It just so happens that my mother is in need of a portable oxygen concentrator which would total out to about $5000.  I want to buy this for her, and take advantage of the 0% intro APR I have with CapOne.  My original plan was to put the whole balance on my card and pay it off immediately with the money I was going to get from cashing out my vacation pay at my previous job (I resigned on Dec. 24th after accepting a position at a new firm, starting in Jan.) + the money I have already set aside for the purchase.  Unfortunately at my exit interview I was informed that I would not be receiving the check for my vacation payout (a little over 3K) until mid-March!  I know that it is ideal to keep credit utilization below 30%; I've kept it under 3% so far, making regular purchases and paying them off weekly.  Unfortunately I only have at most $2.5K squirreled away right now to put toward this purchase, which would leave my utilization at 50%, at least for a time.  I'll be in a position to make decent payments on the purchase for the first few months of the year, until I finally get the lump sum in March which I would use to pay off the balance.

My concern is, how would maxing out my card and paying off half the balance before CapOne reports to the credit bureaus affect my score?  Would this effect be temporary, going away after I pay off the balance in March and return to keeping utilization below 10%?  Or does it work like derogatory marks (late payments etc) that ding your credit for years before dropping off your credit report?  I'm brand spanking new to building my credit, and I need to get/keep my score as high as possible for when my lease is up in the summer and I look to relocate in NYC (many landlords won't even consider renting to anyone with <700 FICO scores!).  I really want to help my mother get the medical equipment she needs to literally breathe easier, but I want to do it the right way!  Thank you for taking the time to read through this, and for any advice or info you can share.

[Anonymous]

You will be just fine. Utilization does not have a memory.  If you want to be extra safe (which I probably wouldn't do this), you could wire a bill paymen to capital one for $2500, then purchase the tank. That way your utilization never went to 100%.

HOWEVER, it will probably look good to capital one for a higher credit limit later. You are already planning on using the card the right way.  You have the most forgiving creditor out there.  You will have NO problem whatsoever charging this card up to the max, paying half before the statement date, then taking your time to pay the rest off.

In other news, what other cards are you thinking about adding?  In an ideal scoring world you would have 3 credit cards, pay 2 of them off by statement cut date (not the due date) every month, and let at least  $2 but no more than 10-30% report as a balance.

I would also suggest you toss your debit card aside for now, once you pay off half the balance on this, use this card for everything and make payments weekly or daily if you have to.  If you are swiping a debit card you are losing money.

Lastly, whatever you do, please price around for this medical equipment.  A lot of places won't say it publicly but they will match and even beat competitors pricing.  Is there some reason why you cant bill medicare or just pay to rent this 02 concentrator?  It is pretty uncommon for a person to own one of these outright, at least in my experience. They rent them weekly or monthly and bill medicare.   If she can't afford to buy this, I would see if there is some type of financial assistance here or insurance to help offset the cost.

Always lower your upfront cost as low as possible, even with coupons/price matching, then pay with a rewards card.