Credit Card Utilization

[Anovice]

Prior to the pandemic, my FICA credit score was always about 825. During the pandemic, Capital One decided to cut my credit limit from $10,000 to $5,000. Unfortunately, I used this credit card very little, which I am sure is the reason that they cut my credit limit in half. The only other credit card that I have and is the one that I use, is a Costco Visa. Since the pandemic, my credit score has been 797 plus or minus a few points.

I would like to get my credit score back to about 825. The only way I can see how to do that is to increase my credit limit, which would lower my utilization, becuse my spending has not increased. Even this I do not understand, because with my lowered credit limit, I am still under 30% utilization (barely). If increasing my credit limit is the answer to increasing my credit score, I would rather not go back to Capital One to increase my credit limit. Is an answer to apply for another credit card?

[CH-7-Mission-Accomplished]

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@Anovice wrote:

Prior to the pandemic, my FICA credit score was always about 825. During the pandemic, Capital One decided to cut my credit limit from $10,000 to $5,000. Unfortunately, I used this credit card very little, which I am sure is the reason that they cut my credit limit in half. The only other credit card that I have and is the one that I use, is a Costco Visa. Since the pandemic, my credit score has been 797 plus or minus a few points.

I would like to get my credit score back to about 825. The only way I can see how to do that is to increase my credit limit, which would lower my utilization, becuse my spending has not increased. Even this I do not understand, because with my lowered credit limit, I am still under 30% utilization (barely). If increasing my credit limit is the answer to increasing my credit score, I would rather not go back to Capital One to increase my credit limit. Is an answer to apply for another credit card?

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A 797 FICO score is outstanding.   There is virtually no difference in the credit terms you would be offered with a 797 versus an 825.  

I get that it's pride. I like my scores at 850 but that's just for bragging rights.  

If you only have two credit cards and you open a new one, you would likely take a 20+ point hit to your 797 score.  

Honestly you shouldn't have any utilization on cards with those two lenders unless they were zero interest rate balance transfers.   If it means this much to you, just pay down that utilization and you will pop back to 825.  30% utilization is not good.  It's better than 40% and worse than 20%.   The 30% utilization is a myth that refuses to go away.   The best utilization rate as reported to the credit bureaus monthly would be 1% to 3% aggregate.   Many of us just let $5 report on one card each month.

You remind me of me when I was in college.   I always had to have a 4.0 GPA.   I was devastated when I got something less.  I graduated with a 3.8% GPA which was good enough for magna **bleep** laude, but that missing 0.2% still haunts me.   It's an OCD issue.

[CH-7-Mission-Accomplished]

I just noted that myFICO bleeped the c-u-m in my honors degree.   How silly.  I mean it's Latin.

[Horseshoez]

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@Anovice wrote:

Prior to the pandemic, my FICA credit score was always about 825. During the pandemic, Capital One decided to cut my credit limit from $10,000 to $5,000. Unfortunately, I used this credit card very little, which I am sure is the reason that they cut my credit limit in half. The only other credit card that I have and is the one that I use, is a Costco Visa. Since the pandemic, my credit score has been 797 plus or minus a few points.

I would like to get my credit score back to about 825. The only way I can see how to do that is to increase my credit limit, which would lower my utilization, becuse my spending has not increased. Even this I do not understand, because with my lowered credit limit, I am still under 30% utilization (barely). If increasing my credit limit is the answer to increasing my credit score, I would rather not go back to Capital One to increase my credit limit. Is an answer to apply for another credit card?

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A fair amount to unpack here, so a few comments (some of which are at cross purposes):

• I don't think a higher total credit limit will boost your scores all that much, and almost certainly not back up to 825
• Adding another card will actually hurt your scores a bit what with the hard pull and the recalculation of your AAoA
• The collective here at myFICO believe for optimal scores you need the following:
  • At least three revolving credit cards
  • Should allow only one to report a trivial monthly charge (say under $100)
• If I were in your shoes I'd do the following:
  • Pay down your balance(s) to under 9% of your total credit limit (this will give you an immediate boost without doing anything else)
  • If you have more than one card reporting  balances, then pay all but one down to zero and then pay the remaining one down to under 9%, or better still, under $100
  • Request a CLI with CapOne (they do CLIs with a soft pull, so not impact on your scores)
  • Apply for a third credit card (assuming you don't already have three), yes, this will impact your scores for a while, but they will recover
  • If you don't have a mortgage, a car loan, or any other type of installment loan, apply for a Secured Savings Loan (SSL); PenFed and NFCU both offer such loans.  Once opened, pay said SSL down to under 9% and let it sit.

[Thomas_Thumb]

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@Anovice wrote:

Prior to the pandemic, my FICA credit score was always about 825. During the pandemic, Capital One decided to cut my credit limit from $10,000 to $5,000. Unfortunately, I used this credit card very little, which I am sure is the reason that they cut my credit limit in half. The only other credit card that I have and is the one that I use, is a Costco Visa. Since the pandemic, my credit score has been 797 plus or minus a few points.

I would like to get my credit score back to about 825. The only way I can see how to do that is to increase my credit limit, which would lower my utilization, becuse my spending has not increased. Even this I do not understand, because with my lowered credit limit, I am still under 30% utilization (barely). If increasing my credit limit is the answer to increasing my credit score, I would rather not go back to Capital One to increase my credit limit. Is an answer to apply for another credit card?

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Key point is to maintain credit utilization under 9%. There are many ways to do this:

1. Reduce reported balance on statements by making early payments before statement cuts. This may require you to adjust spending habits to ensure no last minute charges show up before statement cuts. It also means double payments - one before statement cuts and then a 2nd after cut date to PIF.

2. Swallow your pride and ask for a $5k CLI. This may trigger a HP but still worth it in the long run. I had a card CL dropped from $20k to $13k due to non use back in 2009 or 2010. Not happy about it. Started using card again. Later asked for a CLI and they bumped CL to $18k.

3. Get another card like Discover where CLIs every 6 months are possible via on-line request without HPs.

I'd suggest a combination of 2 and 3. Your current aggregate CL is too constraining IMO. Impliment #1 if you feel a need to maximize score at some point.

Given your credit score, I'd forego a SSL. Really no value add in complicating your situation with a token loan. Get a loan when you need one for financial reasons.

[Anovice]

Thank you for your posts.

I only have the two credit cards. I receive my Costco Visa statement about the 10th of each month. I pay it all the next day. I receive my Capital One statement around the 15th. I pay it all the next day.

The only thing that I could do differently, is that I have a monthly recurring $361 bill that I put on my Captial One Visa. This bill arrives early in each month, it is not due until the 25th of each month, but I pay it immedicately upon receipt. This means that it might be showing balances for both credit cards at some point in time during the month. What I could do is continue paying my Costco Visa around the 10th of each month but not put the $361 bill on my Capital One Credit card until a few days after I pay my Costco Visa. 

If addiing another credit card will hurt my credit score, certainly, I do not want that. Or, should I apply for another credit card because I ony have two? I do not know what a CLI is, but I really do not like Capital One and would rather not do more with them if possible. My mortgage is paid off, I paid cash for my car, and I do not have an installment loan.

It seems to boil down to adjust how I use my Capital One credit card as described above, request a CLI whatever that is, apply for another credit card or do nothing.

Thoughts?

[Horseshoez]

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@Anovice wrote:

Thank you for your posts.

I only have the two credit cards. I receive my Costco Visa statement about the 10th of each month. I pay it all the next day. I receive my Capital One statement around the 15th. I pay it all the next day.

The only thing that I could do differently, is that I have a monthly recurring $361 bill that I put on my Captial One Visa. This bill arrives early in each month, it is not due until the 25th of each month, but I pay it immedicately upon receipt. This means that it might be showing balances for both credit cards at some point in time during the month. What I could do is continue paying my Costco Visa around the 10th of each month but not put the $361 bill on my Capital One Credit card until a few days after I pay my Costco Visa. 

If addiing another credit card will hurt my credit score, certainly, I do not want that. Or, should I apply for another credit card because I ony have two? I do not know what a CLI is, but I really do not like Capital One and would rather not do more with them if possible. My mortgage is paid off, I paid cash for my car, and I do not have an installment loan.

It seems to boil down to adjust how I use my Capital One credit card as described above, request a CLI whatever that is, apply for another credit card or do nothing.

Thoughts?

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Comments:

• There is one other thing you can do (which I do); you look at your balance online and pay it in full before the statement date.  That way your statements report either zero, or a small number of charges which post between your payment and the statement.
• A "CLI" is a Credit Line Increase; there are typically two types, "auto-CLI" where your lender bumps up your limit without you asking, and a requested CLI where you ask for a higher limit.
• What don't you like about your CapOne card?  I have two and really like them.
• As has been suggested, opening up a third card will temporarily depress your scores.
• Given you have no installments, opening up an SSL and then paying it down under 9% will help your almost immediately

[WildestDreams]

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@Anovice wrote:

Thank you for your posts.

I only have the two credit cards. I receive my Costco Visa statement about the 10th of each month. I pay it all the next day. I receive my Capital One statement around the 15th. I pay it all the next day.

The only thing that I could do differently, is that I have a monthly recurring $361 bill that I put on my Captial One Visa. This bill arrives early in each month, it is not due until the 25th of each month, but I pay it immedicately upon receipt. This means that it might be showing balances for both credit cards at some point in time during the month. What I could do is continue paying my Costco Visa around the 10th of each month but not put the $361 bill on my Capital One Credit card until a few days after I pay my Costco Visa. 

If addiing another credit card will hurt my credit score, certainly, I do not want that. Or, should I apply for another credit card because I ony have two? I do not know what a CLI is, but I really do not like Capital One and would rather not do more with them if possible. My mortgage is paid off, I paid cash for my car, and I do not have an installment loan.

It seems to boil down to adjust how I use my Capital One credit card as described above, request a CLI whatever that is, apply for another credit card or do nothing.

Thoughts?

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I agree that getting the utlization down will help, ive seen it work! also

My understanding is a SSL (savings secured loan) the takeout then pay down most of it right away let the rest pay over 3 years hack would help you since you do not have any installments reporting, BUT I don't know how much since your score is already very good.. The amazing advice on this forum has taught me that for optimal scoring you do need an installment loan not sure if that goes out the window when your scores are already high though...maybe one of the experts can weigh in on that specifically?

[Thomas_Thumb]

Getting a 3rd card may drop your score in the short run 15 to 20 points. This happens because you are temporarily placed on a new accounts scorecard. However, after 12 months that penalty will be gone and your score will have greater growth potential than before.

Currently you have a thin file. As such it is subject to greater swings in credit score. Adding an account can add stability in addition to increasing score. Better to do this early on so the account can benefit from aging over time.

Too few accounts puts you in a vulnerable position. A credit card issuer may reduce your credit limit or even close your account? Then what? Having 3 accounts helps mitigate the impact of adverse action on a single account.

[Anovice]

• Should I call Capital One and ask them if they will do an auto-CLI? If they won't and I ask for a higher limit, does this hurt my credit score? 
• I have never been late on paying a bill in over 50 years. I understand why Capital One's computers cut my credit score in half, but I do not like it. Also, I like buying American and would rather talk with customer support here than in Panama of the Philippines.
• If I go the route the another credit card, in addition to Discovery, can someone receommend a few? I do not care what the interest is because I pay immediately upon receiving the statement. 
• If I get another credit card how long will this impact your scores for?
• Thomas_Thumb said " It also means double payments - one before statement cuts and then a 2nd after cut date to PIF." By example, does this mean that if my statement says $500, then I pay $500 before the statement cuts and $500 after the statement cuts? What does PIF mean?

Where I am driving is I am thinking of purchasing a vacation home next year where I will need a mortgage and would want the lowest interest rate possible.