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From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION

Established Member

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION


@AirTroop wrote:

@sarge12 wrote:

+ 1000 I feel that really needs to be emphasized...studies show that people tend to spend more on a credit card than they would if paying in cash!!! If you can not remain disciplined enough to resist it causing un-needed spending, then you would be better off without any credit cards. Never ever allow plastic cards to cause you to live beyond your means...IMHO, it just is not worth it. You should control your credit cards rather than let your cards control you...end of sermon!!!

My new $30K, $700 per month installment loan totally agrees with this point!  Lesson learned!

 

I fail to understand why Credit Utilization should ever be factored in credit reports. If a creditor gives you a high credit line such as for example 25,000. One should be allowed to use most of it without utilization penalty. What should count i believe is rather a person could pay the credit in full. 

Message 11 of 13
Valued Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION


@yankees992012 wrote:

@AirTroop wrote:

@sarge12 wrote:

+ 1000 I feel that really needs to be emphasized...studies show that people tend to spend more on a credit card than they would if paying in cash!!! If you can not remain disciplined enough to resist it causing un-needed spending, then you would be better off without any credit cards. Never ever allow plastic cards to cause you to live beyond your means...IMHO, it just is not worth it. You should control your credit cards rather than let your cards control you...end of sermon!!!

My new $30K, $700 per month installment loan totally agrees with this point!  Lesson learned!

 

I fail to understand why Credit Utilization should ever be factored in credit reports. If a creditor gives you a high credit line such as for example 25,000. One should be allowed to use most of it without utilization penalty. What should count i believe is rather a person could pay the credit in full. 


I fail to understand how it could not be a factor. Every debtor I've ever seen default except due to unforseen extreme medical or the like has done so after their credit card debt gradually increases over time. Steadily increasing utilization means someone is spending more than they are earning. This actually works ok until their debt load becomes too high, as the debtor just shifts more debt across an ever increasing number of cards. Eventually however, the debtors debt load becomes unsustainable and the willingness of new lenders to extend more credit stops. At that point default and maybe even bankruptcy becomes inevitable. High utilization is the strongest signal of all the factors that someone is living beyond their means. Credit scores were created to predict the risk of default for the lender to make lending decisions, and high utilization raises that risk...period!



TU fico08=831 05/31/18
EX fico08=800 06/18/18
EQ fico08=826 04/18/18
EX fico09=823 06/02/18
EQ fico bankcard08=856 05/22/18
Message 12 of 13
Established Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION


@yankees992012 wrote:

@AirTroop wrote:

@sarge12 wrote:

+ 1000 I feel that really needs to be emphasized...studies show that people tend to spend more on a credit card than they would if paying in cash!!! If you can not remain disciplined enough to resist it causing un-needed spending, then you would be better off without any credit cards. Never ever allow plastic cards to cause you to live beyond your means...IMHO, it just is not worth it. You should control your credit cards rather than let your cards control you...end of sermon!!!

My new $30K, $700 per month installment loan totally agrees with this point!  Lesson learned!

 

I fail to understand why Credit Utilization should ever be factored in credit reports. If a creditor gives you a high credit line such as for example 25,000. One should be allowed to use most of it without utilization penalty. What should count i believe is rather a person could pay the credit in full. 


Unfortunately there's no real way to quantify that metric. You could argue that someone with 10 years of perfect payment history across all accounts should be cut some slack. While I agree in principle, there's this thing called bust out fraud that banks have to contend with.

Additionally, there are those who "could" pay in full, but willingly choose not to (ie strategic default), and no scoring model can accurately account for that. There's always the risk that someone could just say "screw it" and go rogue one day.




Message 13 of 13