No credit card required
Browse credit cards from a variety of issuers to see if there's a better card for you.
Quick question (first question) do creditors like to see people who barely use their credit or people who heavily use their credit but pay it off to reflect the same balance as someone who barely uses their credit?
For example, Cardholder A has a $1000 limit and spends $50 for the month, and pays balance in full. So their utilization was 0% but the high balance was 5% of total limit.
On the other hand, Cardholder B has a $1000 limit but spends $1000 over a week, pays it down to $0 the next week, uses another $1000 the next week, and pays it in full again. Their utilization would be 0% as well but the high balance would be $1000 or 100% of their limit.
From my perspective it's obvious that Cardholder B would be someone creditors/lenders would love to extend more credit to due to heavy usage yet responsible management but I could be wrong as I JUST got a FICO score in May lol I didn't even know what a credit card was last year so all this speculation is off what I've learned so far. Anybody can shed light?
Utilization on your FICO score is only judged by what is reported. You can use your card and cycle your limit as much as you want, as long as when your statement cuts, the utilization is low (below 9% for best results). For example, my highest limit card right now is $500 Discover It. I spend through the limit a couple of times a month. It only ever reports between $5-$30 a month. Banks like to see that you are using their cards. This won't guarantee a credit limit increase, but they do prefer to see some usage imo. As long as it doesn't come off as you're surviving off of credit or desperate for credit, you should be ok. In the past, I had no idea about utilization. So I would just max my card out and wait for the bill to come and pay in full. (This was before the age of smartphones and banking apps.) My assumption was that the bank saw heavy usage and payments so I was good. But since all of my cards were reporting maxed every month, my scores never went up. Hope this helps.
My utilization is always 0% but I've seen some posts that say having 0% report isn't good. So I was really wondering how would creditors look at heavy spenders vs infinitesimal users.
@Anonymous wrote:Quick question (first question) do creditors like to see people who barely use their credit or people who heavily use their credit but pay it off to reflect the same balance as someone who barely uses their credit?
For example, Cardholder A has a $1000 limit and spends $50 for the month, and pays balance in full. So their utilization was 0% but the high balance was 5% of total limit.
On the other hand, Cardholder B has a $1000 limit but spends $1000 over a week, pays it down to $0 the next week, uses another $1000 the next week, and pays it in full again. Their utilization would be 0% as well but the high balance would be $1000 or 100% of their limit.
From my perspective it's obvious that Cardholder B would be someone creditors/lenders would love to extend more credit to due to heavy usage yet responsible management but I could be wrong as I JUST got a FICO score in May lol I didn't even know what a credit card was last year so all this speculation is off what I've learned so far. Anybody can shed light?
This really is lender specific. There is no one formula to meet what they want.
For example, Capital One LOVES heavy usage and pay. They also seem to like high reported balances, as long as those balances are ultimately paid. I remember being stuck at a certain CL with them when I was using and paying off promptly. I then allowed a high balance to report (temporary score drop), paid it off, and then requested a CLI and got it. I paid that balance off (reported zero again, score back up) and moved on.
Other lenders like to see steady usage, but in prudent amounts so as to not scratch that limit. Some lenders, like Discover, have their policies housed somewhere in the Bermuda Triangle. Trying to get a grip on what they want is like trying to get cats to march in a parade.
It's ALL YMMV, with very few exceptions.
From the issuer viewpoint, the ideal is maximum profit at minimum risk. So issuer differences (such as they are) really come from their perception of risk.
I think changes in behavior are perhaps the biggest flag. So someone who spends a lot and always pays in full is a pretty good customer. If every now and then there is a small interest charge, that's even more profitable. But if you go from always pay in full to usually carrying a balance (especially if you are paying only a bit more than minimum), an issuer might wonder why the change and suspect some financial issue.
But, providing you can reassure them that you are going to pay, they are going to prefer the big spenders with low utilization over the tiny spend customer. The key is the first bit!
@Anonymous wrote:My utilization is always 0% but I've seen some posts that say having 0% report isn't good. So I was really wondering how would creditors look at heavy spenders vs infinitesimal users.
Yes, having all cards report 0 is viewed as a negative. You will get a reason code stating, No recent revolving account usage. (Or something along those lines.) Always let at least one of your cards report a small balance. It doesn't have to be much, could be between $1-$5. Also, I looked at your card limits in your sig. With those limits I wouldn't worry to much about heavy usage, as long as you are paying in full and letting a small balance report on at least one of the cards. I don't think you have to worry about it being looked at as credit cycling when you have really low limits. As opposed to say if you were cycling through a $10k card a few times a month. As @CreditCrusader said, wether or not a particular bank likes heavy spend is going to be dependent on that bank. For some banks, that can be the reason they will extend more credit to you. While others won't care how much you use and may never give you an increase.
Banks have three methods of income generation on credit cards:
1) Interest
2) Transactions (shared with Visa et al.)
3) Fees (annual etc.)
There is no bank in the world that doesn't want that second one unless they feel it is fraud or some other things where they are losing money. Beyond that though they want your swipes.
The first one, smart financial people simply use credit cards as a transactor (0% offers notwithstanding), and the comparison between A and B in the OP's scenario it is always B.
Lenders value not defaulting, on-time payments, good utilization, in that order. Paying interests would be cherry on top.
Your credit score likes perfect payment history and low, not zero utilization.