cancel
Showing results for 
Search instead for 
Did you mean: 

Question About Utilization

tag
MomoMango
Regular Contributor

Question About Utilization

Hello, I've been lurking on these forums for a while, and I just decided to join the community. And I have to say I'm very thankful because I've learned so much more credit and started to make more careful decisions. Smiley Happy I recently just started my credit journey and I had some questions about credit utilization.

 

What I've learned so far is that credit card companies look at how much utilization you use on your cards. I also know that you should use at least 10% or 30% for your utilization. But I am not sure if paying the minimum balance will avoid getting a late fee. So could I pay the minimum balance before the due date and only leave 10% or 5% of the balance on there without receiving a late fee?

 

I currently have Discover It Student Credit Card for about almost 2 months with a $1500 starting limit. My due date is the 6th of every month and the statement period ends on the 11th. 

 

 

 

 







Wish List

Updated: January 21st 2022 at 11:06pm
Message 1 of 18
17 REPLIES 17
coldfusion
Community Leader
Mega Contributor

Re: Question About Utilization

If you pay at least the mininum payment each month, you won't be assessed a late fee.   You will however accumulate interest. 

 

Narratives that suggest it is helpful if you revolve balances of 10-30% of your credit limit are BS.    

 

There is a technique known as All Zero Except One (AZEO) that some cardholders will follow because in many cases it can help maximize one's FICO scores. I suggest you research that, the technique has already been thoroughly discussed here many times. 

(3/2024)
FICO 8 (EX) 846 (TU) 850 (EQ) 850
FICO 9 (EX) 850 (TU) 850 (EQ) 850

$1M+ club

Artist formerly known as the_old_curmudgeon who was formerly known as coldfusion
Message 2 of 18
Anonymous
Not applicable

Re: Question About Utilization

The Minimum payment is the amount due to avoid a late fee.

 

The rule of thumb is 10% or less despite the CMS educational sites citing 30% or less.

 

Mentally you should report for example on your $1500 CL an amount of $150 or less.

 

Depending on your scoring strategy and goals though it's easier to just let the balances report and setup autopay for the statement balance so you don't run into paying interest which negates your rewards you're earning by using the cards.

Message 3 of 18
Anonymous
Not applicable

Re: Question About Utilization

“I also know that you should use at least 10% or 30% for your utilization.”

Ah, welcome but that’s not actually the case. Using “at least” 30% will lower your score considerably. There is no floor, except you don’t want all cards to report zero. So something on at least one card but less then half your cards.

Ideally (for scoring) you want to keep your total aggregate balance below 8%. Not above 10% and definitely not above 30%. I’m not sure if you got mixed up and meant to say “below” and not “at least”. Someone will come along to direct to some threads that you can get more info on those thresholds. Good luck
Message 4 of 18
SouthJamaica
Mega Contributor

Re: Question About Utilization


@MomoMango wrote:

Hello, I've been lurking on these forums for a while, and I just decided to join the community. And I have to say I'm very thankful because I've learned so much more credit and started to make more careful decisions. Smiley Happy I recently just started my credit journey and I had some questions about credit utilization.

 

What I've learned so far is that credit card companies look at how much utilization you use on your cards. I also know that you should use at least 10% or 30% for your utilization. But I am not sure if paying the minimum balance will avoid getting a late fee. So could I pay the minimum balance before the due date and only leave 10% or 5% of the balance on there without receiving a late fee?

 

I currently have Discover It Student Credit Card for about almost 2 months with a $1500 starting limit. My due date is the 6th of every month and the statement period ends on the 11th. 

 

 

 

 


You've got it upside down. Be sure to use less than 10% overall and less than 30% overall. (Really 9% and 28% to be on the safe side).

 

How much less? The less the better. (except that with some FICO score models you will come out better with one card reporting a small balance than with all cards reporting zero balance)


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 5 of 18
Remedios
Credit Mentor

Re: Question About Utilization

You can use as much as you want/need. What they are talking about is reported utilization. 

 

If your card has rewards, make the best use out of them, just pay it down to some acceptable level before statement closes, then pay your balance off once the statement is ready (any time before the due date)

Message 6 of 18
MomoMango
Regular Contributor

Re: Question About Utilization

This might be a dumb question since I'm still new to credit, but is the statement balance the minimum balance?
When I looked at my statement with Discover is showed the "New Balance," which is now the minimum balance. The minimum balance was when I used it the day after the due date. 

If I do pay the statement balance, will I avoid paying interest? I currently have the 0% APR for about 5 months, but I would like to be cautious.

Also I always pay it all off, but I don't want credit companies thinking I'm not using my card.







Wish List

Updated: January 21st 2022 at 11:06pm
Message 7 of 18
Remedios
Credit Mentor

Re: Question About Utilization

If you pay statement balance, there will be no interest. Also, there is no interest being assessed while you're in 0% promo APR. 

Once the promotional period expires, interest accumulates on any amount not paid in full from previous statement, and you lose grace period for new purchases. 

 

So, whenever possible, pay the entire statement balance. 

Message 8 of 18
Anonymous
Not applicable

Re: Question About Utilization


@MomoMango wrote:

I currently have Discover It Student Credit Card for about almost 2 months with a $1500 starting limit. My due date is the 6th of every month and the statement period ends on the 11th. 


The statement balance is what gets reported each month, so you want that to show between 0 and $135. Above 0, but not over $135, or 9% of the limit.

 

All the articles on the web will say 'under 10%', but they don't tell people that 9.5% will not be 'under 10%' due to the way utilization is rounded up.

 

Use the card as much as you want, and make payments by the 11th to keep it in the sweet spot. I think we're both in the same 'new-to-credit scorecard' where I just found that staying under 4% utilization also gets us a few more points. (Above zero, but below $60 for your limit.)

Message 9 of 18
Anonymous
Not applicable

Re: Question About Utilization

Never force yourself to carry a balance just to meet some imaginary objective. If by some reason a person has to carry balance then in that instance you should never go higher than 28% utilization. As it severely affects your score. While under 9% is optimum, it's best not to carry a balance ever if it can be avoided though.

 

You can charge up to $1400 per statement, so long as it's paid by the due date. No need in paying in percentages, and leaving a few Dollars left owing. Doing so will avoid any interest or late fees. During your 0% promo, however. You can carry a balance from month to month only paying  the minimum due to avoid late fees. Just make sure usuage is being reported, thus do not pay before the statement cuts. If other Banks do not see usage, they may not see you as a profitable customer.

Message 10 of 18
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.