One dumb question !

[Anonymous]

Let us say your credit limit on a credit card is $500 and assume that you pay in full each month ....If you charge 200 each month and pif when the bill is due does this mean that in the 3rd month you are considered going over the limit  3*200=600  ?

if the answer is no, is  200/500= 40% utilization each month bad ?

please pardon my ignorance I m still learning

[Anonymous]

no question is dumb, we are all learning.

no, if you pay in full each month, your balance is 0 when the 200 is added the next month and therefore you are never over the limit, given the conditions in your statement.

The UTI of 40% would be considered high if it was OVERALL but if its only on that card and your average is low, you are fine. That is my understanding at least and it has served me well so hopefully we can get a couple of confirmations and you should be fine.

good luck.

[Scamp]

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@Anonymous wrote:

Let us say your credit limit on a credit card is $500 and assume that you pay in full each month ....If you charge 200 each month and pif when the bill is due does this mean that in the 3rd month you are considered going over the limit  3*200=600  ?

if the answer is no, is  200/500= 40% utilization each month bad ?

please pardon my ignorance I m still learning

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Hi, melmas - as Guardian said, are no dumb questions!

Your util will be 40% if you're paying (as Joe Normal, non-FICO-addict does) after you receive your statement each month.  Util goes by the REPORTED balance - very generally speaking, most cc's report your balance as of the last day of your billing cycle (your statement date), so if that $200 is on there then, that's what gets reported to the CRAs and would give you a pretty icky 40% util on that card each month - not good for your score!

A way around that which most of us use to manage util is to pay our balances down to 1-9% util or PIF completely BEFORE our statement/balance reporting dates (there are benefits to having a small balance report instead of 0, in certain circumstances), and if we do leave a tiny balance for reporting purposes, we then pay it off right away after the reporting date.

Hope this helps. 

[Anonymous]

Thank you for that but even with the high individual DTI for the card, as long as the overall DTI is low then it shouldn't hurt as much, correct? Because I have one card that has a DTI of like 68% but my overall is 8% and I KNOW it is not hurting me. So maybe take all of it to heart and try to use good judgement on it. Good luck.

[Scamp]

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@Anonymous wrote:
Thank you for that but even with the high individual DTI for the card, as long as the overall DTI is low then it shouldn't hurt as much, correct?

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FICO scoring does take individual util into consideration, but you are correct that it doesn't hurt as much if one has several TL's and overall util is quite low.

However, that said - creditors these days are eyeballing their customer's individual accounts and overall credit picture much more closely, so from a safety standpoint to dodge any AA due to nervous, over-reactive lenders not liking anything much over 20-25% util on anything, I'd still encourage keeping both overall and all indivdual utils as low as possible.

[Anonymous]

Thank you guys !

what a shame !! I feel so embarrassed ....i always thought the credit limit is equal to the total of all balances charged on a card since its first use...And that one has to wait for a credit limit increase to charge more. Maybe I thought so because too many people in this forum are trying to get more cli. I ll tell you what ! I just learned something today

[marty56]

If you know you are going to charge 200 each month, you can try to pay as much as you can beforethe next statement date so you can have the benefit of a small amount (< 10%) report and pay the rest by the due date so you would never pay interest, never be late and always show low but none 0 util.  Kinda hard to set up but you might try ot.

[Anonymous]

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@scapegrace13 wrote:

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@Anonymous wrote:
Thank you for that but even with the high individual DTI for the card, as long as the overall DTI is low then it shouldn't hurt as much, correct?

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FICO scoring does take individual util into consideration, but you are correct that it doesn't hurt as much if one has several TL's and overall util is quite low.

However, that said - creditors these days are eyeballing their customer's individual accounts and overall credit picture much more closely, so from a safety standpoint to dodge any AA due to nervous, over-reactive lenders not liking anything much over 20-25% util on anything, I'd still encourage keeping both overall and all indivdual utils as low as possible.

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Gotcha, agreed. Better safe than sorry.

[Anonymous]

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@Anonymous wrote:

Thank you guys !

what a shame !! I feel so embarrassed ....i always thought the credit limit is equal to the total of all balances charged on a card since its first use...And that one has to wait for a credit limit increase to charge more. Maybe I thought so because too many people in this forum are trying to get more cli. I ll tell you what ! I just learned something today

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You are welcome and don't be embarrassed, life is a learning experience.

Message Edited by Guardian on 11-13-2008 02:32 PM