Unless you are applying for credit (cards, car loans, mortgage) don't stress it. Spend what you would normally spend, and pay the balance each month. Utilzation is not cumulative, your score represents what your credit report looks like only at the instance it is pulled.
To put it another way, let's say you have two identical people, as far as credit profile. Same AAoA, same number of inquiries, same number of accounts, neither has ever been late on a payment or had a collections or BK. They each have one credit card and here is their utilization over the year:
Jan 14 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Person 1 20% 25% 30% 50% 25% 53% 60% 34% 20% 34% 22% 1%
Person 2 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
They both apply for credit in January 2015. They will both have the same score.
@Anonymous wrote:Hi all,
I am pretty new on here and I found the following statement during serfing the forum:
"Total utilization is the sum of the balances over the sum of the credit lines, and this ideally is kept < 10%, but the utilization on each individual card should also be not too high."
It was an easy task for me when I had BofA 1k and BofA 500 and I paid 0 interest.
I usually paid card to 0 before charging interest. After charging date I went to the shop and buy some food an prepaid cell phone cards to make my utilization around 9% (so I spent about $140 each time and this sum went to report).
But now I have the total credit line about 27k. And I can't spend around $2500 in a single day before reporting!
So my question is how to deal with this issue? I want to continue pay 0 interest and keep utilization around 9%.
I don't really get what the problem is. You NEVER have to pay interest for purposes of utilization. Your utilization is based upon what your balance is at the time that your card company reports it to the CRAs (often this is the same day or within a few days of your statement cutting). Then you have like another 30 days to pay off the balance due before you would be charged interest. Your credit score changes month to month based on utilization so you don't have to worry about it too much unless your getting ready to apply or you are trying to position yourself to have the best possible chance at an auto cli (which can be difficult to predict and may not even happen with everything in order).
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@Anonymous wrote:It seems that I don't understand something(
I'll give the concrete example:
- My last statement was about 85$ and reported 21/09.
- Payment due date is 17/10.
- I spent about $300 this month so I have to pay the balance (385$) before 17/10 to avoid paying interest. My balance will be $0 at 17/10
- The next statement will be reported 21/10.
- Between 17/10 and 21/10 I have to spend ~90$ to get 9% utilization reported at 21/10.
It works fine for 90$ and total credit line of 1000$
But I can't spend $2500 between 17/10 and 21/10 for 27k credit line!
If you last statement balance was $85, then all you have to pay by the due date is $85. Your additional $300 in charges are on next month.
You don't need exactly 9% utlization. The general guideline is 9% or less on one card. Generally anwywhere from 1-9% will be fine. Each person is going to have a different sweet spot, and sure, it is possible that yours is 9%, but it's not going to vary that much when you are under 9%. Letting a $1 balance report is enough to give you 1% (utilization rounds up). If you spend about $400 per month on your card, I'd just let that report and then pay in full. That will put you at 2% which should be fine.
Starting Score: ~500 (12/01/2008)
@Anonymous wrote:It seems that I don't understand something(
I'll give the concrete example:
- My last statement was about 85$ and reported 21/09.
- Payment due date is 17/10.
- I spent about $300 this month so I have to pay the balance (385$) before 17/10 to avoid paying interest. My balance will be $0 at 17/10
- The next statement will be reported 21/10.
- Between 17/10 and 21/10 I have to spend ~90$ to get 9% utilization reported at 21/10.
It works fine for 90$ and total credit line of 1000$
But I can't spend $2500 between 17/10 and 21/10 for 27k credit line!
No, you don't have to pay $385 to avoid paying interest. Just $85 by 17/10. If you spend $300 by the time your statement cuts on 21/10, you have to pay $300 by the next payment date to avoid paying interest.
Finally, 9% isn't a magic number. You won't have a higher score for showing 9% versus 1%, likely it will be lower. Never, ever spend money you don't need to to reach a certain utilization %.
@navyox wrote:
@Anonymous wrote:It seems that I don't understand something(
I'll give the concrete example:
- My last statement was about 85$ and reported 21/09.
- Payment due date is 17/10.
- I spent about $300 this month so I have to pay the balance (385$) before 17/10 to avoid paying interest. My balance will be $0 at 17/10
- The next statement will be reported 21/10.
- Between 17/10 and 21/10 I have to spend ~90$ to get 9% utilization reported at 21/10.
It works fine for 90$ and total credit line of 1000$
But I can't spend $2500 between 17/10 and 21/10 for 27k credit line!
No, you don't have to pay $385 to avoid paying interest. Just $85 by 17/10. If you spend $300 by the time your statement cuts on 21/10, you have to pay $300 by the next payment date to avoid paying interest.
Finally, 9% isn't a magic number. You won't have a higher score for showing 9% versus 1%, likely it will be lower. Never, ever spend money you don't need to to reach a certain utilization %.
+1
