Credit Utilization Ratio and Credit Score

[Anonymous]

Hello,

I wanted to know if anybody could help me understand this. I am trying to rebuild my credit. And so far, so god. I'm not where I want to be, but getting there. I have credit monitoring through my bank, USAA. Recently, I got a secured credit card to help me improve my credit. The first two months at the time my balance was reported, I would see an increase in my credit score, and it was going up every month. In september I lowered my utilization ratio to about 15%, and my score went up 15 points just by doing that. Did nothing else. Last october i decided to pay a little more, and so ended up with a utilization ratio of about 1%. To my surprise...and shock my credit score did nothing. Nada. And nothing else happened, no late payments, no new inquiries. Nothing. And I was so sure It would go up. What happened?? Is it a mistake to keep the UR this low? When I kept it higher, my score actually went up consistently. I don't understand. I was thinking of actually keeping it higher this month on purpose, just to see what happens?

[Anonymous]

I've had a similar thing happen to me in the past and from what I have read on the boards and from I have personally experienced I can vouch for the utilization "sweet spot" being the 5% to 9%.  Below 5 and it appears as if you are not utilizing the account.  Too far above and ... well ... we know what over-utilization does.  Then again there are times that several months will pass by and although util is good, no late pays, etc it seemingly goes stale.  This I suppose, is the gardening period and during that time the benefit you will eventually see is that your accounts have aged and matured a bit more.

Again, this is only my personal experience so YMMV (hey I used an acronym YAY!)   ... "your mileage may vary".  Too, if this is your only CC/revolving credit line it would help you enormously to gather a couple more.  Three seems to be again, the sweet spot on number of revolving credit accounts.  Just remember that you will  take an initial score decrease when new accounts post due to new inquiries and a decrease in the age of accounts but after a few months your score should begin to rebound.

Don't let it discourage you at all.  One can absolutely murder their FICO within a short 30-day period but it can take a very long time to bring it back up.  For me, utilization seems to be the way to receive the quickest initial score bump (see my latest posts on my personal experience with credit util YIKES).  I'm sure a more experienced and knowledgable user on here could add (or correct me!) more.

Cheers to you!

[Anonymous]

Thanks for your response!!!!! Appreciate the info. Will try to keep my UR a little higher, maybe around 9. Will do that this month and see what happens. You are correct, that is the only credit card I have (the only  revolving account), the rest are student loans which I keep current, and pay on time. But have 3 negative items on my report. I'm working on those. Some collections that I have actually been avoiding paying with fears that it will damage my score even more (I called and they won't do a "pay for delete"). But i will surely get another secured credit card. When I applied for one with Capital One, my score took a 14 points hit, just for the inquiry. It's amazing how one simple thing can hurt your score so bad and then it takes forever to get it back on track no matter how many good things you're doing for it. But... thanks for the info!!!

[Anonymous]

Certainly!  And from what I understand here on the boards *and* from what I've seen, although the hard pulls stay on your report for two years they seem to fall out of the FICO scoring equation after 12 months.  You're with USAA?  (lucky you!) From what I hear they have a good secured card program and seem to be the only one offering an Amex *Secured* card (do they still do that?) - from their website it looks as if they offer both MC and Amex so I would recommend looking at USAA.

Cheers to you and keep us posted on your status.  

[Anonymous]

LOL I wish!!!!!! They sure do. But, I tried applying for their secured AMEX and they told me it's only for members of the military and their families, etc.  I have accounts with them, but I'm not with the military. So, so much for that. But I'll keep doing everything I can to increase my score. Hopefully will get there soon.