Does having had high usage before affect my score after I pay the balance?

[Anonymous]

Hi,

I don't know if this is a proper question to ask here, but basically my situation is that I just got a new credit card, which comes with a 15 month long 0% intro APR period. I am wondering if I should leverage this promotion.

If I leverage the 0% APR and only pay the minimum payment every month, then I'm sure to have a very high credit usage because I don't pay back all my debts.

My question is if this would negatively impact my FICO score AFTER I pay back ALL my balance when the 0% intro APR period ends. For example, consider these 2 following conditions:

1. I pay only minimum payment every month and carry a nearly 100% usage on my credit card for the 15 months, and pay all the balance at the end of the15th month, so my credit usage drops to 0 after that
2. I always pay all my balance before the closing date each month, so I will always have 0 balance on my statement.

At the end of the 15th month, when in both cases I will have a credit report showing no late payment, 0 current credit usage, how much will my score be different due to that I have a (possibly slightly) different payment history?

Thanks in advance.

[SouthJamaica]

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@Anonymous wrote:

Hi,

I don't know if this is a proper question to ask here, but basically my situation is that I just got a new credit card, which comes with a 15 month long 0% intro APR period. I am wondering if I should leverage this promotion.

If I leverage the 0% APR and only pay the minimum payment every month, then I'm sure to have a very high credit usage because I don't pay back all my debts.

My question is if this would negatively impact my FICO score AFTER I pay back ALL my balance when the 0% intro APR period ends. For example, consider these 2 following conditions:

1. I pay only minimum payment every month and carry a nearly 100% usage on my credit card for the 15 months, and pay all the balance at the end of the15th month, so my credit usage drops to 0 after that
2. I always pay all my balance before the closing date each month, so I will always have 0 balance on my statement.

At the end of the 15th month, when in both cases I will have a credit report showing no late payment, 0 current credit usage, how much will my score be different due to that I have a (possibly slightly) different payment history?

Thanks in advance.

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Assuming there are no other changes in your account, once you restore the accounts to their original condition your scores would not be hurt.

However, that is a big assumption.  Maxing out a card like that could cause you problems with other creditors. Even the lender offering the promo might not be thrilled.

I wouldn't advise it.

[Phana24]

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@Anonymous wrote:

Hi,

I don't know if this is a proper question to ask here, but basically my situation is that I just got a new credit card, which comes with a 15 month long 0% intro APR period. I am wondering if I should leverage this promotion.

If I leverage the 0% APR and only pay the minimum payment every month, then I'm sure to have a very high credit usage because I don't pay back all my debts.

My question is if this would negatively impact my FICO score AFTER I pay back ALL my balance when the 0% intro APR period ends. For example, consider these 2 following conditions:

1. I pay only minimum payment every month and carry a nearly 100% usage on my credit card for the 15 months, and pay all the balance at the end of the15th month, so my credit usage drops to 0 after that
2. I always pay all my balance before the closing date each month, so I will always have 0 balance on my statement.

At the end of the 15th month, when in both cases I will have a credit report showing no late payment, 0 current credit usage, how much will my score be different due to that I have a (possibly slightly) different payment history?

Thanks in advance.

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As @SouthJamaica mentioned, there could be repercussions that will negatively impact your credit score after the balance is paid off if you let one card approach 100%, particularly if it remains there for a sustained period of time.  If you're looking to free up cash, keep the new card under 90% initially, then get it under 70% in a couple of months.  You'll probably be OK if you keep your overall UT under 30%, but if you want to be safe, under 50% on one card and 30% overall will be fine.

[pakratus]

Right now, no it will not.  Currently, scoring model's utilization does not have a memory.  

FICO 10T, I believe, scores with trending data.  It includes 24 months of utilization.  But, we don't know when banks, if any, will adopt it.  How long has FICO9 been out and banks still use FICO8...?  Also, will banks choose FICO10 or 10T...?

VantageScore 4.0 has trending data, but who makes credit decisions based on it...?

[Anonymous]

I will chime in to say that high utilization on ONE card is not as big of a deal as many have made it out to be in this thread. If you use a 0% intro APR or balance transfer or whatever to carry a balance and your other cards have small or no balances, then you are not likely be the target of adverse action.

The one card being at greater than 90% utilization will certainly be impacting your score, but it is hard to say exactly what that impact is. Others have definitely given good advice about how to maintain a score while carrying a promotional balance, i.e. keep it to less than 50% of the card's limit. But if you need to use the full limit of the card to achieve a financial goal, do it. Your scores will recover and the savings will be worth it.

[JFox418]

I've had really high balances on a couple accounts over the last few years. Upwards of %90-%95 at times and carried for months. (not proud of that...)  Minimum payments were always paid on time and all my history for those are positive. I don't feel like that's impacted me negatively besides paying all that interest (which doesn't apply to you on a %0 APR) Like stated previously when those accounts were paid down through the tiers of UTIL points started building up. I don't think I'd purposely spend money just to utilize the %0 unless you needed to free up some cash like someone else mentioned and your scores will drop with the higher utitilization until they are paid back down. 

[NRB525]

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@Anonymous wrote:

Hi,

I don't know if this is a proper question to ask here, but basically my situation is that I just got a new credit card, which comes with a 15 month long 0% intro APR period. I am wondering if I should leverage this promotion.

If I leverage the 0% APR and only pay the minimum payment every month, then I'm sure to have a very high credit usage because I don't pay back all my debts.

My question is if this would negatively impact my FICO score AFTER I pay back ALL my balance when the 0% intro APR period ends. For example, consider these 2 following conditions:

1. I pay only minimum payment every month and carry a nearly 100% usage on my credit card for the 15 months, and pay all the balance at the end of the15th month, so my credit usage drops to 0 after that
2. I always pay all my balance before the closing date each month, so I will always have 0 balance on my statement.

At the end of the 15th month, when in both cases I will have a credit report showing no late payment, 0 current credit usage, how much will my score be different due to that I have a (possibly slightly) different payment history?

Thanks in advance.

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Congrats on the new card. What is the credit line for that card? 

Taking it to 100% utilization is not recommended at any time. However depending on the credit line, building up a balance on that card could save you interest cost or balance transfer fees, so financially, using some portion of that credit limit may make sense.

As noted by others, once paid back down to a lower utilization, and allowed to report after the statement, each scenario should end up at the same score, all else being equal. It won't be the same score as recently, because account aging and the 15 month term of this 0% APR promo will have worked to raise your scores a bit anyway.