I recently applied for an Amex, and the stated the reasons they denied me was because
1) the balances on my other cards were too low
i have also heard horror stories about people being denied for credit limit increases, (and sometimes the card company actually lowered their limit without warning) because they didn't use enough of their limit.
so my question is, if you need a higher utilization ratio to get approved for these things. how do you get approved for certain cards/limit increases without hurting your scores?
for example, this month my utilization ratio went from 5% to 8%, and my score dropped even though I was still under the 10% recommended threshold. I have also seen scores drop as much as 150 points by having a high balance.
and also, why do card companies try to force you to to consistently have high balances every month. Isn't that way more risk for them? What if all their customers did that and then one day no one could pay their bills?
No that's what I do, I always pay in full before the due date. But I heard they want your balance to be high when they report. Cause that's the only time they see your balance. It's not like they pay attention to what you do throughout the month. They only care what it shows when the statement closes. Cause that's all they see. And when you go to request a credit limit increase, or apply for a new card. The computer/algorithm sees what was reported. Not what you did throughout the month. They see the balance at closing, and if you paid that balance. That's why Amex rejected me, I had put thousands of dollars on my card every month for the past few months. But at statement closing it only reported $20 balances. And that's all their algorithm saw.
To keep my ratio low I make sure the balance is low when the card reports. And then pay in full. And throughout the money I charge a bunch and pay it off a bunch. But my balance is always low when the card reports. So to them it looks like I'm barely using the card.
Never heard of any credit card issuer trying to insist people carry high balances. Carrying prolonged consistent high balances is indeed seen as high risk and will have negative effects on your scores. It will also be more likely to lead to denials for increases, denials for new cards and balance chasing by your current lenders.
Not using a card for a prolonged period of time can also lead to decreases in credit limits, or account closures. Using any card you'd like to keep open once every few months for a small purchase will usually avoid this issue.
Your lenders absolutely know exactly what you're spending on their cards every month whether you PIF or not. What they want to see is responsible usage and management of the credit you have. For example, they see you manage a $5k or $10k credit limit well, you're more likely to get new approvals with similar, or higher limits provided the rest of your profile is in order.
If you're seeing 150 point swings in your scores based on usage, with no negatives on your reports, there's no doubt you're looking at Vantage scores which are virtually useless when it comes to lending decisions. Ignore them.
Keep your reported aggregate utilization under 9%. Don't allow more than 50% of your revolving accounts to report balances, and continue building positive payment history. Bigger and better things will come.
Out of curiosity,
why is it bad to have more than 50% report a balance? As long as the balance reported on both cards is low, why does that matter?
@Cblough93 wrote:Out of curiosity,
why is it bad to have more than 50% report a balance? As long as the balance reported on both cards is low, why does that matter?
There's a score penalty on some Fico scoring models for "too many accounts with balances". Depending on your profile, it could be up to 20 to 30 points no matter how low the reported balance is on the accounts.
Fantastic tip! I'm looking to implement AZE1 but its good to know this could be higher if needed/wanted - but to stay under 50% of accounts.
Rebuild Started May 2023...
Waiting Patiently Until March 2025...
Starting Scores: 528, 534, 542Don't get me wrong I understand the idea behind it, they think if you have multiple cards and they all have a balance it could indicate financial trouble, but if all the balances are low it shouldn't matter how many cards report a balance. In my opinion.
also I wanted to get back to my original question, so you are All saying, as long as you use the card throughout the month, it Doesn't matter what the balance is at statement closing? You can still be consider for credit limit increases without the issuer saying "you aren't using enough of your available credit"?
cause I have seen posts of people who had their limits slashed for not reporting high enough balances
@Cblough93 wrote:Don't get me wrong I understand the idea behind it, they think if you have multiple cards and they all have a balance it could indicate financial trouble, but if all the balances are low it shouldn't matter how many cards report a balance. In my opinion. You would think that would make the most sense, but... we're not talking about people physically doing the scoring, we're talking about how a computer comes up with a determination based on historical data, and the current information it's provided with so what we end up with is what the scoring algorithms spit out.
also I wanted to get back to my original question, so you are All saying, as long as you use the card throughout the month, it Doesn't matter what the balance is at statement closing? YES... You can still be consider for credit limit increases without the issuer saying "you aren't using enough of your available credit"? Yes and no... It really depends on the lender, and your profile. Generally when a lender gives that as a reason for denials for CLIs, what they're really saying is you're not showing us enough love. In other words, they want to see you use their card more. That does not mean they want you to carry a bigger balance, they just want you to swipe their card more, that's all.
cause I have seen posts of people who had their limits slashed for not reporting high enough balances Unless you're talking about lenders like Synchrony, or Comenity who are known for nonsensical adverse actions like the ones you mention, that's not really a thing with the majority of lenders. My wife for example, has 67 active credit cards. There's no way she would, or could use them all on a regular basis with any amount of notable spend. She uses some of them every 5 to 6 months and puts just enough on them to show she used it. Others she'll let go for nearly a year and do the same. She's never had a problem with someone closing an account for not enough use, and she's never paid a penny in interest on any credit card balance her entire adult life.