Credit Card Utilization?

[Anonymous]

I'll start this by saying that I have ever missed a payment, carried a balance, or any other negative hits against my credit in my somewhat short period of having a credit history. My credit score was slowly but surely going up a little bit each month. Then suddenly my credit score dips 12 points virtually overnight and the only thing that has changed according to my credit report is my utilzation has gone up? 

I'm trying to even understand this considering I've actually used my card much more than I have this month in the past and it didn't change anything. The balance that it says that I currently have in the card utilzation section is commically small compared to ones I know I have had in the past and for much longer periods considering my payment due date was only a couple weeks ago and was totally paid off in time. 

Can someone please help me make sense of this? I have never felt so discouraged after feeling like I was on the right path. 

[DollyLama]

You will see dings or bumps at these thresholds, 8.9% being the best, 28.9%, 48.9%, the higher the more dings. Also factored is overall total utilization (first), then individual utilization on each card. 

The best is always to have all cards report a zero balance except one credit card, and only a balance at statement cut (not due date) of less than 8.9% of that one card's total line of credit. 

Having more than 1/2 of CCs reporting a balance example 3 of 5 cards.

Never let all CCs report zero - that will ding your score also. 

[Anonymous]

Where are you getting your "credit score" from? Website?

[Anonymous]

If you are paying off your credit card(s) every month, any score change related to utilization is trivial.  They aren't "real" score changes, as in long-lasting and as soon as utilization reports back at the point it was previously, your score will return to what it was previously.  Utilization has no memory.  There's absolutely no reason to get discouraged due to a score change related to a utilization change as long as you are paying off your cards in full every month.

I agree with the above post that knowing where you are getting your scores from would be helpful.

[Anonymous]

Nice point by BBS.  It sounds as though our OP is interested in long-term growth in his scores -- with no immediate need to apply for credit.

If so, there is no need to implement AZEO (All Zero Except One) or an ultralow utilization.  Those are awesome strategies for the the 40 days prior to an application for credit, but they don't help you build credit long term. 

The only exception is when a person is rebuilding, with scores in the 600s or less.  Such a person can benefit from ultralow utilization just to make sure existing creditors don't get worried by a utilization going high one month.  People in the 700s or higher are typically fine as long as they keep all their cards at < 49%.  And even then one card can go higher as long as total util is < 29%.

[Anonymous]

I would also add that this "problem" with slight scoring fluctuations related to utilization are magnified if your total credit limits are extremely small.  For example, someone with just one credit card that has a $500 limit is going to experience this issue far more than someone with 10 credit cards and $100k in credit limits, generally speaking.  If the person with a single $500 limit card follows a PIF pattern every month, but tends to use most of their credit limit every cycle, it's completely possible that dramatically different (percentage wise) balances may report.  One month you may report a balance of $10 and the next it could be $400 depending on where your spend/payments fall.  In this example, you could be looking ta 1% utilization reported verses 80%, which with only one card means that's also your aggregate utilization.  The more credit cards someone has and the higher the limits, the less this illustration above matters.