10% is a good rule. You are correct if you pay it down to 0 before the cycle ends it appears as no activity on your report, which is not always a completely good thing. You could use it for more, then pay it down to below 10% before it closes. Then when you get your statement you pay in full before the due date. That way you show activity but maintain good utilization.
Starting Score: 690
We really need a sticky thread on this topic.
The general advice is that for best scoring purposes you want one account to report 9% or less of that card's credit limit (not total CL across all cards). All other accounts should report $0. Remember, utilization is rounded up, so for a $300 CL, you want a balance of $27 or less.
You are controlling what reports to the CRAs. You can use your card for more than $27 in the month, but you don't want more than $27 to report. The number that is reported to the CRAs for most credit cards is the balance that is listed on your statement. There are some cards that report an end of month balance. You can search around the threads to figure out how yours reports, but it is likely statement balance. You can also figure this out if you have a monitoring service by just noting whether the amount listed on your report matches your last month's statement balance.
So, with that in mind, if you charge $100 this month, you would want to make a payment a couple days before your statement generates to bring the balance below $27 so that when your bill is generated the balance reads $27 or less. After the statement generates, you can immediately pay the remaining balance so that your balance is paid in full and you don't get charged any interest. You don't have to do it immediately, you just need to do it before your due date. But a common misconception with the 9% or less rule is that people think they need to carry a blance. You are always better off if you pay in full (PIF). This whole thing is for reporting purposes.
Another couple points to note. 9% or less on one account is what works best for most people. Where your exact sweet spot is will depend on your specific credit report. Additionally, you don't have to worry about this if you mess it up one month. If you pay it back down to less than 9%, your score will go right back to where it was the previous month all else being equal (which it can never be exactly equal because everything has just aged another month).
Hope that helps.
@castlefox wrote:Nice write up Walk_K
I agree. This is one of the things I read here some time ago that made a huge difference in my CC management...
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