The 30% spending rule

[Anonymous]

Do you guys believe in the 30% spending rule in order to get a good credit score and to get your limit increased faster? I always get told by specialists at the bank to only spend 30% on my card then pay it all back every month. After my own experiences, I don't really believe the 30% spending rule anymore.

[Anonymous]

There are a number of variables that go into our scores. Prevailing knowledge suggests that exceeding 30% or more will ding your score. Some have suggested that for best results, keep your utilization below 10%. I've heard 6% as well. And this utilization is assessed at a point in time that may not coincide with when your statement drops; it's usually a few days prior. And, depending on the scoring model, some look at individual account utilization as much as overall utilization. 

In my case - when I got my first two cards - Discover 10,300 limit and PNC  Visa   1000 limit. 
I thought that it was 10,000 for my PNC, cuz I'd opened it without my reading glasses, like an aging schmuck! 

I'd used up 70% of my utilization on that PNC, not even realizing. I'd paid it off in full, but when I'd seen my error, I was pretty embarrassed. Despite nobody knowing my goof except me, PNC and the three bureaus. So, I shelved that card and applied for USAA Amex and got an 11k limit (with glasses on!) 

My income was the same, the amount I charged was the same - but the utilization was much different, at least among individual cards. 

So, you have to keep those factors in mind when you use your cards. There's always a reason for the rise and fall in your scores. Just keep in mind that the banks will generally report once a month - or less. It's entirely up to them. And your scores won't necessarily rise as fast as you'd expect, but - they don't drop as fast as you'd expect either. 

[Thomas_Thumb]

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@Anonymous wrote:
Do you guys believe in the 30% spending rule in order to get a good credit score and to get your limit increased faster? I always get told by specialists at the bank to only spend 30% on my card then pay it all back every month. After my own experiences, I don't really believe the 30% spending rule anymore.

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From a Fico score perspective it is best to keep utilization on any/all individual cards that report balances under 30% while also maintaining aggregate utilization (all cards combined) under 9%.

My experience with credit line increases is: If you don't ask or request on-line, you don't get CLIs. Many CCs (Citi for example) only allow CLIs every 6 months. Others like Discover card appear to accomodate increase requests every 60 days. Many creditors, BoA excepted, will process CLI requests with only a soft inquiry (SP) as opposed to a hard inquiry (HP). SPs don't impact credit score but, HPs can cause a score drop.

[RonM21]

Just looking at the threads in general, there isn't a specific formula. You'll find many times that some things happen that make no sense at all, as well as the opposite. In theory, if you follow the usual guidelines, you are more likely to have good results. But when ymmv, this is not always the case.

[gdale6]

There is nothing wrong with using the full limit of the card on a monthly basis, you just dont want it reporting a high balance and would want to pay it significantly prior to it reporting the balance to the CRAs as it would give you a large Fico hit. I dont exceed 35% of an individual card for long term carries and I have never had a problem.

[takeshi74]

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@Anonymous wrote:
Do you guys believe in the 30% spending rule in order to get a good credit score and to get your limit increased faster? I always get told by specialists at the bank to only spend 30% on my card then pay it all back every month. After my own experiences, I don't really believe the 30% spending rule anymore.

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30% is a generally suggested max.  It does not mean that you will have high scores at 29% and that you will see low scores at 31% or higher.  Revolving utilization can impact scores under 30%.  Generally, the lower the better.  Ideal is generally going to be well under 10%.

Also, don't conflate spend and reported revolving utilization.  The two are not the necessarily the same thing.  You can spend whatever you need/want and manage the reported balance as needed/wanted.

While revolving utilization has a significant impact it is not the only thing that matters for score or for CLI's.  Keep in mind that revolving utilization factors into Amounts Owed for FICO scoring but it is not the only factor that matters.

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

CLI's are going to be based how your credit and income stack up against the product's critiera.  Score is just one consideration.

[Anonymous]

Sometimes it just doesn't seem to make sense to me. You follow what they say is the generally accepted rule and your score drops anyway. I alway pay my bills on time, never late. One month I paid off the balance on both of my credit cards, utilization 0% and my score drop 14 points. The next month I decided to carry a balance but made sure it was under 30%. Utilization 22% and even had a CLI of $1500, in gain 3 points with experian and lost 9 points with equifax. It's like you can never win. Seriously!!!