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It is whatever balance the lender reports to the CRAs. Most of them report the statement balance. I have heard of a couple that report the balance on a specific day of the month. I want to say NFCU and USBank, but am not positive.
There's also a "highest balance" on your reports, i.e. the highest balance in the card's history. That's handled differently from bank to bank. It could be either the highest reported balance (AMEX) or the highest balance at any time (Capital One, Chase). Highest balance isn't a scoring factor, though.
@Anonymous wrote:
In regards to utilization being the ratio of your balance to spending limit, is the balance defined as the official balance as shown on your statement? Or is it the highest overall balance, at any point in the statement month?
For example:
-A credit card has a 10,000 limit.
-The user has no balance from the previous month (i.e., they paid their previous bill in full)
-The statement will close on August 10th
-As of July 25th, the user’s balance is 4,000
-On August 9th, the user makes a payment of 1,500, bringing the balance down to 2,500, and doesn’t make any additional charges before the statement closes
-The statement closes on August 10th showing an outstanding balance of 2,500
Do credit bureaus consider the balance to have been the highest balance during the statement period (4,000)? Or the balance as reported on the official statement (2,500)?
The reason I ask is I’m wanting to verify a strategy of making mid-month payments to bring the balance below the 30% utilization threshold is sound. There are some great credit card rewards points perks I don’t want to miss out on, but want to be sure I’m not underestimating how thoroughly the bureaus review my monthly usage activity.
Thanks!
1. The balance is the reported balance; in the vast majority of cases that's the balance in the credit card statement.
2. I personally know of only 2 exceptions, (a) Chase which will report a zero balance if you pay the account down to zero mid-cycle, and (b) Vantage West FCU which reports the 5th day of the month. There are no doubt several others.
In the example you gave, the reported balance, which is the one used for scoring, is 2500.
Your stragegy of making mid-month payments is fine. I would target 28% rather than 30%.
The author is mistaken. Your balance could be at 95% of your credit limit with no scoring impact, as long as you pay it down before the CC reports to the bureaus (typically once a month with the amount being the statement balance).
The author also focuses on 30% as the sole number of importance. She may be misleading her readers in two ways:
(1) That keeping below 30% prevents scoring penalties.
This is not so. To prevent all scoring penalties you need a total utilization under 8.99%. The next level of penalty is 28.99%
(2) That 29.1% is safer than 31.1%.
This is untrue. FICO rounds percentages up. Therefore 29.1% is considered 30%, and you have therefore crossed the 28.99% breakpoint. 31% and 29.1 % are penalized the same.
@Anonymous wrote:The author is mistaken. Your balance could be at 95% of your credit limit with no scoring impact, as long as you pay it down before the CC reports to the bureaus (typically once a month with the amount being the statement balance).
The author also focuses on 30% as the sole number of importance. She may be misleading her readers in two ways:
(1) That keeping below 30% prevents scoring penalties.
This is not so. To prevent all scoring penalties you need a total utilization under 8.99%. The next level of penalty is 28.99%
(2) That 29.1% is safer than 31.1%.
This is untrue. FICO rounds percentages up. Therefore 29.1% is considered 30%, and you have therefore crossed the 28.99% breakpoint. 31% and 29.1 % are penalized the same.
+1 Agree on all points.
It's unbelievable how much misinformation is out there.