New to the Boards.. Quick Question about the 8.9% utilization I keep reading about on the boards

[Anonymous]

Hello all,

Long time troller first time poster...

I have a quick question, I keep reading that one way to raise your fico score ( amongst many) is to have an 8.9% balance on the CC reported, (shows low utilization, good managemant of credit). However, excuse my ignorance, how can I acheive that without paying interest? Lets say my payment is due on the 16th and then the new statement starts on the 19th, am I understanding that I should pay the balance in full by the 16th and then charge up to 8.9% on the card by the 19th?

Sorry if it seems like a stupid question but I am looking to help raise my scores..

I carry zero balances on 4 credit cards,  and 3 store cards...

my installment loan (car) is 1 year old..

No lates on any credit accounts

seems like other than time my scores are stuck in quicksand.....

thank you in advance. 

[Anonymous]

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@Anonymous wrote:

Hello all,

Long time troller first time poster...

I have a quick question, I keep reading that one way to raise your fico score ( amongst many) is to have an 8.9% balance on the CC reported, (shows low utilization, good managemant of credit). However, excuse my ignorance, how can I acheive that without paying interest? Lets say my payment is due on the 16th and then the new statement starts on the 19th, am I understanding that I should pay the balance in full by the 16th and then charge up to 8.9% on the card by the 19th?

Sorry if it seems like a stupid question but I am looking to help raise my scores..

I carry zero balances on 4 credit cards,  and 3 store cards...

my installment loan (car) is 1 year old..

No lates on any credit accounts

seems like other than time my scores are stuck in quicksand.....

thank you in advance. 

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Welcome to myFICO!

It’s not 8.9% but rather less than 8.9% but more than $1. Above 8.9% has a FICO penalty and all cards at zero has a FICO penalty so you want to stay in the sweet spot to have optimal scores. 

Some creditors will forgive a debt that is less than a certain amount so $5 is a safe bet to have post. 

So pay your statement in full and then make new charges but before your statement cuts, make a payment to get under that 8.9% if need be. 

[Anonymous]

Hi, and Welcome!

I don't think most people fool with that all the time. It's really just to finesse your scores having your utilization below 8.9% and only one card reporting a balance. I think month to month, most people just try to keep things reasonable to avoid AA. I wouldn't really sweat the percentage too much unless you are trying to max your score for a particular reason. It has no long term impact. That said, I usually try to keep mine below 15% as a general rule.

To answer your other question. Your credit card has what's known as an interest free grace period that extends from the time the statement is issued until the due date. As long as you pay the statement balance by that due date, you will continue to pay no interest.

So, say you charge $100 and get a statement saying you owe $100, as long as you pay that statement by the due date, you get no interest. If you only pay $50, and leave $50 carried over onto the next statement, then you will start paying interest.

[Anonymous]

Your statement balance is what gets reported which is a little while after your due date each month.  As long as you pay your statement balance in full, you won't pay interest.  If you have an oddball reporting creditor such as US Bank, they report your balance on the last business day of the month regardless of what day your statement closes.

It is as simple as having a Netflix subscription on autopay.  Pay your statement balance by the due date and let them report the monthly subscription as your balance each month. 

[Hex]

You want to have the balance you want to report to the CBs to be what is listed on the bill on the day the credit card statement is generated for the month. This is what the bill they send you will say. You could receive the bill in the mail or electronically. After you receive this bill (statement) pay the balance to zero and make sure you give everything time to clear and truly register as zero. Once you have the zero balance for the month you charge again to the amount you want to report the next month. If you make sure to get back to zero each month you should avoid any new interest charges. That’s because almost all banks or credit unions give you a monthly grace period with no interest. If you ever carry interest month to month you might have to do this for two cycles to clear up any left over (trailing interest).

[Anonymous]

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@Hex wrote:
After you receive this bill (statement) pay the balance to zero and make sure you give everything time to clear and truly register as zero. Once you have the zero balance for the month you charge again to the amount you want to report the next month. If you make sure to get back to zero each month you should avoid any new interest charges.

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That's probably not a bad way to keep up with what you still need to pay, but you don't have to pay to zero. You just need to get the statement balance to 0. I couldn't tell you the last time my BCP was at a true zero balance other than during grocery quarter for Disacover IT since it gets used weekly for groceries. I just make sure to pay at least the statement balance, and have never paid any interest on it.

[SouthJamaica]

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@Anonymous wrote:

Hello all,

Long time troller first time poster...

I have a quick question, I keep reading that one way to raise your fico score ( amongst many) is to have an 8.9% balance on the CC reported, (shows low utilization, good managemant of credit). However, excuse my ignorance, how can I acheive that without paying interest? Lets say my payment is due on the 16th and then the new statement starts on the 19th, am I understanding that I should pay the balance in full by the 16th and then charge up to 8.9% on the card by the 19th?

Sorry if it seems like a stupid question but I am looking to help raise my scores..

I carry zero balances on 4 credit cards,  and 3 store cards...

my installment loan (car) is 1 year old..

No lates on any credit accounts

seems like other than time my scores are stuck in quicksand.....

thank you in advance. 

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1.  8.9% is an important number for overall utilization, not for individual account utilization.

2. You never have to pay interest. Utilization is based on the reported balance, which is usually, subject to a few exceptions, the statement balance. If you pay off the statement balance before the due date, on purchases, there will be no interest.

3. You don't need to report a balance on all your cards, you just need to report a balance on one of your cards, to avoid the all-zero-balance penalty.

4. You can use a card and have a zero balance on it, by using it and  then paying it off before the statement date

5. The most important score-boosting pointers for revolving account usage are:

-try not to let any one card report a balance greater than 28%

-try not to let combined reported balances be greater than 8.9%

-try to let as many accounts as possible report a zero balance, but not all your accounts

[Anonymous]

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@SouthJamaica wrote:

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4. You can use a card and have a zero balance on it, by using it and  then paying it off before the statement date

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^^^ This is what you were likely missing, Eagleswin. This and the converse, that you can have your statement balance report, pay it off before the next statement, and never pay interest. Using a combination of these two tactics, you can have your credit cards report whatever your want them to (limited by what you spend and what you can afford to pay, of course).

[Anonymous]

I appreciate all of the insight, I just updated HULU and Netflix from my checking acct to my CC. This will cause a utilization of 2% on the card.

Again thank all of you for your help. While I am still trying to understand all of the acronyms (abbreviations) used on the board, please bare with me as I get up to speed on the subject.

[SouthJamaica]

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@Anonymous wrote:

I appreciate all of the insight, I just updated HULU and Netflix from my checking acct to my CC. This will cause a utilization of 2% on the card.

Again thank all of you for your help. While I am still trying to understand all of the acronyms (abbreviations) used on the board, please bare with me as I get up to speed on the subject.

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It doesn't have to cause "utilization" [in the FICO score sense of the word] if you pay it off before your statement cuts.