Help understanding utilization, "less than 10% balance," and relationship to score.

[GoldSorata]

Wait a sec, you cross posted this and have the exact same thread over in rebuilding.

These really should be merged. You'lve got two different conversations going on about this.

[Anonymous]

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@Anonymous wrote:

When your statement cuts, whatever balance you have at that time is reported to the credit bureaus.  For example if you have a $1500 limit on one card and have a balance of $140 then you are just under that 10%.  When you get that bill then you can pay in full.  Doing it that way you let a balance report but you don't pay interest because you are not actually carrying a balance.  Most cards have a 25 day grace period so as long as you pay the charges on the first bill they show up on you won't pay interest.  Hope this makes sense to you.

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Will paying it all with autopay fit into what you're describing?  Will that allow the balance to report while also paying the balance off before interest is accrued?  

[CreditDunce]

When you get your bill, make sure you pay the full amount due by the due date.   If you do so, you will never have to pay interest.  (At least for most credit cards, eg. Discover, Cap1).    As long as you pay at least the minimum each month, FICO will be happy.

The caveat is your current FICO score is heavily influenced by your reported utilization.  For example, let's say you have one credit card with a $1000 CL and your statement balance is $950.   Even if you pay off the balance the next day, most credit card companies will report the $950 statement balance to the credit reporting agencies.  When your FICO score is calculated, your score will be low since your reported utilization is 95%.   If the next month your statement balance is $50, your FICO score will jump much higher because your reported utilization is 5%.  

For the most part, there is no need to worry about your current FICO score.  Just make sure that you have a small statement balance one oe card and all other have a zero statement balance before any credit apps.  To achieve this you can either use your credit cards very little the month before you app OR pay most of your balance before the statement cuts like the other poster was recommending.  

Note, this advice is not optimal for people who carry balances. Carrying a balance means you pay the minimum but not pay the entire amount due before the due date.  First they should worry about how much their statement balance is because they are paying interest.  Secondly, if you are carrying a balance, credit card companies are much more concerned about if you can pay them back.  If your credit score dips really low they may take some adverse action (e.g. lower your credit limit, etc).

[CreditDunce]

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@Anonymous wrote:

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@Anonymous wrote:

When your statement cuts, whatever balance you have at that time is reported to the credit bureaus.  For example if you have a $1500 limit on one card and have a balance of $140 then you are just under that 10%.  When you get that bill then you can pay in full.  Doing it that way you let a balance report but you don't pay interest because you are not actually carrying a balance.  Most cards have a 25 day grace period so as long as you pay the charges on the first bill they show up on you won't pay interest.  Hope this makes sense to you.

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Will paying it all with autopay fit into what you're describing?  Will that allow the balance to report while also paying the balance off before interest is accrued?  

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Yes, if you autopay for the full balance each month, you will not pay any interest with Discover or Cap1.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

When your statement cuts, whatever balance you have at that time is reported to the credit bureaus.  For example if you have a $1500 limit on one card and have a balance of $140 then you are just under that 10%.  When you get that bill then you can pay in full.  Doing it that way you let a balance report but you don't pay interest because you are not actually carrying a balance.  Most cards have a 25 day grace period so as long as you pay the charges on the first bill they show up on you won't pay interest.  Hope this makes sense to you.

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Will paying it all with autopay fit into what you're describing?  Will that allow the balance to report while also paying the balance off before interest is accrued?  

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Yes if you set up the autopay to pay after the bill is genereted.  Are you planning to use this card for your daily expenses?  The reason I ask is that if you charge up say 50% of your limit one month then you would need to pay the balance down to less than 10% before your statement cuts.

Here's what I do.  I charge all of my daily expenses and alot of my monthy bills to my QS1.  My statement cuts on the 24th and that bill is due the following 21st.  I pay it down to somewhere under 10% before the 24th.  Once the statement cuts, I'll pay the balance off and charge it up again.  

[Anonymous]

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@Anonymous wrote:
Yes if you set up the autopay to pay after the bill is genereted.

How does this work exactly?  Regular auto pay, right?

I am not planning for this to be an every day card, no.  I'm literally planning to use this only for bills-- cellphone, electric, etc.    
Any bills I can set to be auto pay will go onto this card.   

My hope was that i could set up auto pay for the complete balance every month (bills were all auto pay to my checking account anyway) but I really had no idea how doing this would impact my credit score/utilization/etc.  

It's all a bit cryptic to me.  This helps me a bit, but I still don't quite understand how doing this will impact my credit score/usage/utilization/whatever.  

Your answer has helped me a lot though, thanks!

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:
Yes if you set up the autopay to pay after the bill is genereted.

How does this work exactly?  Regular auto pay, right?

I am not planning for this to be an every day card, no.  I'm literally planning to use this only for bills-- cellphone, electric, etc.    
Any bills I can set to be auto pay will go onto this card.   

My hope was that i could set up auto pay for the complete balance every month (bills were all auto pay to my checking account anyway) but I really had no idea how doing this would impact my credit score/utilization/etc.  

It's all a bit cryptic to me.  This helps me a bit, but I still don't quite understand how doing this will impact my credit score/usage/utilization/whatever.  

Your answer has helped me a lot though, thanks!

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The only problem I see is what you're saying your auto pay will pay your balance after the bill cuts.  For example if you have a $1000 credit line and your power is $150 and your cell is $100 then you will have $250 owed on your CC bill.  That means that they willl report that $250 balance which would be 25% utilization.  If there are more bills you plan to put on it then of course that would raise the amount reported.  Just remember that whatever amount shows up on your credit card bill has already been reported to the CB's.  

[Anonymous]

That's a good point... 10% will be tough to do.  It's a 3k limit, so i'll have to keep it under $300.  

Maybe i can limit it to just a few bills at first, and then shift more to it once the credit limit increases after awhile.  

Speaking of which, how can I expect credit limit to work?  Assuming my payments are always on time and my credit-to-debt ratio is very low (under 10% on both cards), how long does something like a credit increase take?  Months?  Years?

[NRB525]

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@Anonymous wrote:

That's a good point... 10% will be tough to do.  It's a 3k limit, so i'll have to keep it under $300.  

Maybe i can limit it to just a few bills at first, and then shift more to it once the credit limit increases after awhile.  

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No, you don't. Don't be scared by the "1%-9%" reports. The "Optimization" that you will see in your score range won't be noticeable with the improvement that is naturally happening to your score from making payments on time. The types of bills you are talking about should not be too much for this card to handle. Set those bills up to charge CapOne, set the Cap One to autopay the full statement balance after the statement cuts, before payment due date, and relax.

I also think it is better to just let your card report naturally and pay in full after that statement, both for future CapOne apps and to let other creditors see your payment history / activity history. Your goal is to get better cards. FICO score is only one aspect of that quest.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

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@Anonymous wrote:

When your statement cuts, whatever balance you have at that time is reported to the credit bureaus.  For example if you have a $1500 limit on one card and have a balance of $140 then you are just under that 10%.  When you get that bill then you can pay in full.  Doing it that way you let a balance report but you don't pay interest because you are not actually carrying a balance.  Most cards have a 25 day grace period so as long as you pay the charges on the first bill they show up on you won't pay interest.  Hope this makes sense to you.

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Will paying it all with autopay fit into what you're describing?  Will that allow the balance to report while also paying the balance off before interest is accrued?  

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Yes if you set up the autopay to pay after the bill is genereted.  Are you planning to use this card for your daily expenses?  The reason I ask is that if you charge up say 50% of your limit one month then you would need to pay the balance down to less than 10% before your statement cuts.

Here's what I do.  I charge all of my daily expenses and alot of my monthy bills to my QS1.  My statement cuts on the 24th and that bill is due the following 21st.  I pay it down to somewhere under 10% before the 24th.  Once the statement cuts, I'll pay the balance off and charge it up again.  

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I do the same and have only one cc reporting.  It's not much of a score change for that but combining it with the low UT of 1%, you can maximize your score.  But really not necessary unless you have a need to reach a certain Fico score..  Anything under 10% is good.  And not having a balance on the majority of your cards is just making it better.