Having trouble understanding util. w/ secured CC

[Supermade]

I understand how to calculate CC utilization, but I'm having trouble comprehending how it's going to reflect on my credit and how much is ideal to rebuild/raise my credit.

I have a secured BankAmericard.

Balance divided by credit limit.

My balance is about $20 and my CL is $300.

I have read on this forum that I should only be using about 30% of my limit and paying it all off. But I have been doing additional reading and what is confusing to me is people are writing that I should let me CC report that I'm using 5%-9% utilization, but I should still pay off the balance in full.

Does that mean I should only use 5%-9% of my CL ($20~$30), or use 30%(~$90) and pay it off? Or does the whole reporting system for CC work differently when utilization is being reported? Is there a certain period before the payment deadline that reports to credit agencies?

I want my credit perfect from now on and I am 100% determined and motivated on doing this, especially from ruining my credit before the age of 20. No blemishes or anything negative and want an optimal plan for my credit. I am grateful I don't "need to use" my credit card and I'm strictly focusing on using my CC to build my credit for future car loans and a mortage..one day! (only 23yrs old!) It just seem strange that the ideal method of establishing my credit is only use 5%-9%. I would like to at least be able to fill up my tank with my given CL!! ( Side question: Would having a higher CL increase my credit score faster since I'll be having a higher balance, but still within 5%-9% utili?)

I would also like to add that I have a Capital One Secured CC which has yet to arrive(2-3 weeks from today) which will have a CL of $200.

Help would be greatly appreciated. Thanks!

[MarineVietVet]

Hi there.

Everyone's situation is different and there is no one size fits all approach to this but what seems to work well for most people is to have only one of their cards report a small (<9% of it's credit limit) balance each month and then pay in full before the due date. You can use it as much as you want during the month but what's important is the reported balance because for most cards whatever is reported on the monthly statement is what is used to calculate utilization for the month.

You might have to play around with the percentages for a few months to see what works best for you. Some people say that 1-3% utilization helps the most. For others it might be 5-9%. As I said it's not one size fits all.

On any other cards always try and have them report a zero balance each month. That doesn't mean you can't use them just make sure that the desired zero balance on these accounts is achieved several days before their statements post.

Along with individual and overall utilization, FICO also scores the number of all types of accounts reporting a balance.at any one time Making sure less than half of all your accounts report a balance helps most people.

Now this approach really isn't necessary if you're not looking to apply for any credit in the near future or unless you are trying to tweak your score for maximum effect but some folks do this as a hobby just to see how high they can get their score.

ETA: This works the same whether the card is secured or unsecured.

[Supermade]

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@MarineVietVet wrote:

Hi there.

 

On any other cards always try and have them report a zero balance each month. That doesn't mean you can't use them just make sure that the desired zero balance on these accounts is achieved several days before their statements post.

Along with individual and overall utilization, FICO also scores the number of all types of accounts reporting a balance.at any one time Making sure less than half of all your accounts report a balance helps most people.

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[Supermade]

Hey Marine,

The bolded part is what confuses me the most or maybe I'm just thinking too hard about it.

The reporting portion of this. If I my utilization of this is strictly from 1%-9%, does my entire balance get reported regardless of when I pay? So if my balance ONLY goes up to $30, it doesn't matter when I pay (of course on time) because $30 or 10% of my card is going to show as my utilization?

If I can use my CC as much as I want, does that mean I can only use 1%-9% monthly? Or can I use 1%-9% the first week of my billing month, pay it off, then keep doing that during my last week of my billing month? Or will it show up on FICO as 40% utilization.

Again, this is just for rebuilding my recredit and getting it to tip top shape. It isn't a necessity to use my CC.

Thanks!

Had to make a new post. I encountered some editing problems

[MarineVietVet]

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@Supermade wrote:

Hey Marine,

On any other cards always try and have them report a zero balance each month. That doesn't mean you can't use them just make sure that the desired zero balance on these accounts is achieved several days before their statements post.

Along with individual and overall utilization, FICO also scores the number of all types of accounts reporting a balance.at any one time Making sure less than half of all your accounts report a balance helps most people.

The bolded part is what confuses me the most or maybe I'm just thinking too hard about it.

The reporting portion of this. If I my utilization of this is strictly from 1%-9%, does my entire balance get reported regardless of when I pay? So if my balance ONLY goes up to $30, it doesn't matter when I pay (of course on time) because $30 or 10% of my card is going to show as my utilization? Whatever your statement balance is each month is what is used to calculate utilization for that month. You can determine exactly what you want that reported balance to be by timing your payments to bring your balance to the desired amount several days before the statement posts. This is one of the few things we can easily manage each month.

If I can use my CC as much as I want, does that mean I can only use 1%-9% monthly? Or can I use 1%-9% the first week of my billing month, pay it off, then keep doing that during my last week of my billing month? Or will it show up on FICO as 40% utilization. Just remember that it's the reported balance on your statement that is important; not any kind of daily or weekly balance. You can make multiple payments during the month (this is what I do) but just make sure your desired balance is achieved before your statement posts. With the new credit card laws your statement date each month will always be around the same day of the month give or take a few days so with that knowledge you can easily know when to pay down your balance.

Again, this is just for rebuilding my recredit and getting it to tip top shape. It isn't a necessity to use my CC.

Thanks!

Had to make a new post. I encountered some editing problems

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[Student_Loans_Kill]

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@MarineVietVet wrote:

Hi there.

Everyone's situation is different and there is no one size fits all approach to this but what seems to work well for most people is to have only one of their cards report a small (<9% of it's credit limit) balance each month and then pay in full before the due date. You can use it as much as you want during the month but what's important is the reported balance because for most cards whatever is reported on the monthly statement is what is used to calculate utilization for the month.

You might have to play around with the percentages for a few months to see what works best for you. Some people say that 1-3% utilization helps the most. For others it might be 5-9%. As I said it's not one size fits all.

On any other cards always try and have them report a zero balance each month. That doesn't mean you can't use them just make sure that the desired zero balance on these accounts is achieved several days before their statements post.

Along with individual and overall utilization, FICO also scores the number of all types of accounts reporting a balance.at any one time Making sure less than half of all your accounts report a balance helps most people.

Now this approach really isn't necessary if you're not looking to apply for any credit in the near future or unless you are trying to tweak your score for maximum effect but some folks do this as a hobby just to see how high they can get their score.

ETA: This works the same whether the card is secured or unsecured.

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This should really be a sticky

[Supermade]

Marine,

Thanks for your advice. It is really helpful.

The only issue is that your information assumes that a new card holder understands (I state that veryy shamefully) simply CC statment reporting and payments. Many post I've found on this forum, give advice but under the assumption that you know information. Hell, maybe I'm naive and didn't realize this.

I'm posting this for new CC holders who might find this useful one day.

I was confused on how one's utilization of a credit card was reported to credit report agency and that led me find out how this worked.

I have a Bank Americard. I checked my online statement and noticed that my Next Closing Date was on 4/16/2012. I had automatically assumed that my payment was due on that date since I had just opened my account this month.

I came to the forum to find some clarity and although it did, I was also  left with some more confusion. I called Bank of America to try to find a date in which my balance(utilization) was reported to credit agenecies. it turns out that the Next Closing Date was when my balance needs to be at the desired 1%-9%  because that's the date in which the balance(utilization) is reported. But one's 25 day period in which one can pay without paying interest, is a whole different date. That's what was confusing me and I clarified that up.

I understand that this is very basic credit "understandings", but if I was confused, that there has to be many people out there confused. I hope this clarifies some questions for people.