Optimizing Credit Utilization: Building Credit Score by Demonstrating Card Usage and Full Repayment

[msmjj01]

I need some advice. I was blessed to have had good credit years ago that enabled me and my family to have many rewards cards. I collected so much and have about 20 cards.

I have a total credit line of $200,000 spread across about 20 credit cards, with an outstanding debt of $80,000. I am currently making minimum payments and utilized balance transfer. I still have these pending loans. All on personal, not on Businesses credit. So yes, my credit is affected. Additionally, I use around $60,000 on these cards monthly (including business expenses) and pay it off before the statement closes with about 8 cards mainly Bofa, Chase, Citi, Barclays, Amex.

I wanted to ask if paying off the $60,000 monthly before the statement closes positively impacts my credit score. I am currently struggling with my credit score, which has dropped to between 540 and 600 from 850, and some of my credit card issuers have lowered my credit limits due to the high balances being reported. I get the 30% ratio I have exceeded. 

I understand the importance of paying down my debt, but I am going through a tough financial period helping family/relatives during their darkest times as well. My goal is to continue building my credit. Would it be more effective to keep using my cards and paying them off before the statement closes, demonstrating consistent use and full repayment? Or should I focus solely on paying down the outstanding debt without further card usage, given that I am being charged interest and considered a risk?

I appreciate any advice you can offer.

[coldfusion]

---

@msmjj01 wrote:

I wanted to ask if paying off the $60,000 monthly before the statement closes positively impacts my credit score.

---

Not yet suitably caffeinated this morning so I hope this makes sense.

If you're incurring $60K in new charges and paying $60K toward the balances in the same billing cycle there wouldn't be a net change in your overall reported debt so I don't think it would  lead to positive impact to your FICO scores.

You're already getting balance chased which means that your current creditors have already seen your current financial status as having raised red flags and you're at the stage where it's become a real possibility that you're either going to start seeing cards closed as each one reaches a $0 balance or if an individual creditor gets nervous enough they'll just close a card with a balance outstanding.    While it is commendable that you're trying to help family members who are themselves in distress I'll point out a few things:

a) You aren't demonstrating full repayment,  you're demonstrating that you're struggling to keep your head above water by only making minimum payments against legacy debt/reported balances while paying off new charges.  That isn't sustainable indefinitely.

b) One of the things I was taught years ago in lifeguard training was when and how to extricate myself when someone I'm trying to save grabs onto me and risks taking me with them.  While a drowning victim is always a tragedy there is sometimes a decision point where you have to choose if you're going to save yourself as ending up with 2 drowning victims is an even bigger tragedy.

c) there is the meme about not lighting yourself on fire to keep someone else warm, it can be seen as being heartless but reflects a reality

tl;dr prioritize paying down your debts

[Thomas_Thumb]

It sounds to me like you have a debt steady at $80k and an aggregate CL of $200k. On top of the $80k you incur monthly charges of $60k which gets paid off before statement cut date. Then you rinse and repeat.

So, reported aggregate balance now is $80k => 40% utilization. Now, if the $60k monthly expenses is allowed to report on statements, balance increases to $140k. This would cause aggregate UT to increase to 70%. The walls would come crumbling down and your CLs would be balance chased severly. Accounts may get closed with balances preventing further spend.

Going from 40% to 70% reported would definitely hurt. Lastly, Fico also looks at aggregate balance in $ as a scoring factor.

Given your current scores, you must have some derogatories, such as late payments, on file. Utilization is given less weight on dirty scorecards but is still a factor in score. So, the paydowns before statement date are beneficial to score.

Best financially to avoid new charges and pay down debt. Try starting at 3x the minimum monthly payment on each card and adjust from there. Pay off highest apr cards 1st. Watch out for new rounds of balance chasing.

[FicoMike0]

Your post isn't entirely clear to me. Is the $80000 debt credit card, or other loans? You mention pending loans, what are those?

You can get more meaningful advice by providing more detail.

In answer to your question 

 "I wanted to ask if paying off the $60,000 monthly before the statement closes positively impacts my credit score."

 Its certainly better than not paying it, but it's not helping vs not making the charges in the first place. Is the $60000 yours? If you're churning money that's not actually yours, id worry about bankruptcy implications.

You indicate you are being balance chased and your scores are between 540 and 600. You're in a bad situation, as your cl is decreased, you utilization grows in a downward spiral. As far as struggling with credit score, you've lost the struggle. 

Without specifics, it's hard to suggest anything other than paying down the debt.

[msmjj01]

Sorry for the confusion.

Out of a total credit card debt of $200k, around $60k is outstanding. All balances are being paid off monthly on time, with no missed payments or derogatory marks. However, my credit score is currently low due to the high balances.

My monthly spending across all cards is $60-70k, which I pay in full exactly three weeks after each charge is made, even before the statement closes. So, despite paying off the $70k monthly, there is still a large remaining balance. This balance came from a loan I took out through a Citi card and a balance transfer offer, which I maxed out for a family member's surgery and treatments. I'm wondering if paying in full like this has any positive impact.

I'm worried because my credit matters to me, and I want to find a way to pay all this off, clean up my credit, and eventually be able to open more cards in the future.

Sorry, I'm not an expert on this, but I appreciate your help and advice.

[FicoMike0]

I think you've gotten several opinions that running a lot of spend through accounts isn't helping. I suppose the elephant in the room is, what are you spending so much on? Couldn't you cut back $10000 a month and pay off the $80000 in short order?

Do you own a mansion with lots of staff? I was at the Biltmore this year, I can see how it could add up, roflol!

[msmjj01]

The monthly is on business so it's not personal purchases so it has to continue but the loans were all personal. So what's the best way to remedy this? Obviously paying monthly but I hope someone has something yo recommend 

[FicoMike0]

If you list each account with cl and balance along with your monthly pay down budget, you'll get ideas as to where best to apply that budget.

[SouthJamaica]

---

@msmjj01 wrote:

I need some advice. I was blessed to have had good credit years ago that enabled me and my family to have many rewards cards. I collected so much and have about 20 cards.

I have a total credit line of $200,000 spread across about 20 credit cards, with an outstanding debt of $80,000. I am currently making minimum payments and utilized balance transfer. I still have these pending loans. All on personal, not on Businesses credit. So yes, my credit is affected. Additionally, I use around $60,000 on these cards monthly (including business expenses) and pay it off before the statement closes with about 8 cards mainly Bofa, Chase, Citi, Barclays, Amex.

I wanted to ask if paying off the $60,000 monthly before the statement closes positively impacts my credit score. I am currently struggling with my credit score, which has dropped to between 540 and 600 from 850, and some of my credit card issuers have lowered my credit limits due to the high balances being reported. I get the 30% ratio I have exceeded. 

I understand the importance of paying down my debt, but I am going through a tough financial period helping family/relatives during their darkest times as well. My goal is to continue building my credit. Would it be more effective to keep using my cards and paying them off before the statement closes, demonstrating consistent use and full repayment? Or should I focus solely on paying down the outstanding debt without further card usage, given that I am being charged interest and considered a risk?

I appreciate any advice you can offer.

---

Welcome to the forum.

Definitely it will help to pay before rather than after statements close, as that will reduce your utilization, since on most cards the statement balance is the reported balance.

In view of your tenuous position with some lenders, it certainly helps to pay things down and to use the cards less, rather than more.