Hello all,
I have a question about the impact of utilization, long term. Say I have a report that's hit max limit report 3 times in a year, but it never ever missed a payment, always paid in full, just not before statement cut, but by due date. Is this a good or bad thing for a persons credit when looking to establish strong relationship with lenders?
I would think high utilization + proven ability of paying in full on those high utilization each month would allow a customer to acquire much bigger lines, as they show they can pif, with their card being max limit.
Thank you to all who answer
I'm by no means a FICO expert, but based upon my readings here, the answer is a definitive, "It depends." Yeah-yeah, I know, "Gee thanks."
Here's the thing, higher utilizations typically mean lower FICO scores, period, full stop, the end. That said, some lenders, thinking CapOne for instance, seem to like it when you hit a high percentage of your utilization and then pay it off on a regular basis, so while this may not be best for our FICO scores, lots of folks here have opined a history such as yours is what may lead CapOne to give more generous CLIs compared to those of us who never let more than a few dollars report on any given month.
Another thing you will see quoted here with relative frequency is, Finances > FICO. If it is in your best interest to manage your finances in a way which does NOT improve your FICO scores, but which makes most financial sense for you, then that should be your plan.
This question from a high level view point has two answers. The first answer is a definitive no to having any sort of long term impact on your FICO scores and profile. With the inception of FICO 10T, that will likely change someday if and when banks begin to adopt it but that's a different discussion all together. As soon as you pay your balances off and your accounts report, your scores will snap back to where they were before. Utilization has no memory. The second answer is more complicated and depends on how strong your profile is and how solid of a relationship you have with your lenders. Lenders as individuals like to see their cards utilized, it's how they make money. Most won't mind if you use most of your CL, as long as it gets paid promptly. Where it gets tricky is that if you use a large portion of your CL with all of your lenders and let your balances all post organically. This may look like a break out spending pattern that shows you are financially burdened to the point where you have to turn to your revolvers to hold you up. While your lenders like that you are spending with them, if they SP your reports and see that you have all of a sudden maxed all of your cards out, it could potentially cause a cascading effect of balance chasing or account closures. Of course I'm talking worst case scenarios here. Maxing and paying your cards once in awhile is just fine, but you want to be mindful of letting multiple accounts report in simultaneously at a very high utilization rate, as this could very quickly take a turn in a direction you did not want it to go. So essentially, 1 account maxed with low aggregate utilization and a solid profile is probably just fine. Multiple or all accounts maxed at once is just never a good idea IMO.
@TheGameofCredit_ wrote:Hello all,
I have a question about the impact of utilization, long term. Say I have a report that's hit max limit report 3 times in a year, but it never ever missed a payment, always paid in full, just not before statement cut, but by due date. Is this a good or bad thing for a persons credit when looking to establish strong relationship with lenders?
I would think high utilization + proven ability of paying in full on those high utilization each month would allow a customer to acquire much bigger lines, as they show they can pif, with their card being max limit.
Thank you to all who answer
A bad thing.
It might get you a credit limit increase. Or it might get your credit limit decreased. Or it might get your account closed. And it might cause similar adverse action by other lenders, other than the one you're trying to impress. The only thing that's definite is that it will hurt your credit scores across the board. Which is a bad thing.
In building your creditworthiness, moderation is the key. Going to extremes will simply raise red flags.
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Another thing you will see quoted here with relative frequency is, Finances > FICO. If it is in your best interest to manage your finances in a way which does NOT improve your FICO scores, but which makes most financial sense for you, then that should be your plan.
I keep seeing that "Finances > FICO" meme here, but I don't buy it.
If we didn't think that FICO scores were an important factor in one's financial picture, I don't think we'd be in this forum.
@SouthJamaica wrote:
.....
Another thing you will see quoted here with relative frequency is, Finances > FICO. If it is in your best interest to manage your finances in a way which does NOT improve your FICO scores, but which makes most financial sense for you, then that should be your plan.
I keep seeing that "Finances > FICO" meme here, but I don't buy it.
If we didn't think that FICO scores were an important factor in one's financial picture, I don't think we'd be in this forum.
You can ignore it all you want, but the fact is, FICO scores are transient, managing your finances is a lifetime job. As you can see in my signature, I am not an advocate for AZEO (a key behavior for getting FICO scores up to their peak), however, next year when my wife and I are contemplating on buying a house, for the month or three while we're going to be working through the underwriting process, we will both definitely be practicing AZEO just to present the best possible scores. For the rest of our life, screw FICO, we'll just pay our bills on time, keeping balances low or zero, and manage the rest of our finances as best fits our lifestyle.