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Utilization Question

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Anonymous
Not applicable

Utilization Question

Hello Everyone! My first time posting on this board. I have a question about utilization. Say for example I have a $1000 credit limit but I use $500 of it every month and I always pay off the $500 on my statement due date. So, I never end up carrying a balance at the end of my billing cycle. Even though I pay it off is it bad to utilize 50% of the credit limit during the month or is it ok because I'm paying it off every month and never carry a balance?

Message 1 of 13
12 REPLIES 12
Anonymous
Not applicable

Re: Utilization Question

Use as much of the credit limit as you like but make sure 29% or less reports.
Message 2 of 13
SouthJamaica
Mega Contributor

Re: Utilization Question


@Anonymous wrote:

Hello Everyone! My first time posting on this board. I have a question about utilization. Say for example I have a $1000 credit limit but I use $500 of it every month and I always pay off the $500 on my statement due date. So, I never end up carrying a balance at the end of my billing cycle. Even though I pay it off is it bad to utilize 50% of the credit limit during the month or is it ok because I'm paying it off every month and never carry a balance?


Yes it's bad. FICO utilization is based on the reported balance, which is in most cases the statement balance.

 

Example:

A & B each have 1 card with a $1k limit, and each spends $750 a month with it.

For each's account the statement balance is the reported balance.

A pays the account off the day before the statement cuts.

B pays the account off the day after the statement cuts.

 

A has 0% utilization

B has 75% utilization


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 3 of 13
Anonymous
Not applicable

Re: Utilization Question


@Anonymous wrote:

Hello Everyone! My first time posting on this board. I have a question about utilization. Say for example I have a $1000 credit limit but I use $500 of it every month and I always pay off the $500 on my statement due date. So, I never end up carrying a balance at the end of my billing cycle. Even though I pay it off is it bad to utilize 50% of the credit limit during the month or is it ok because I'm paying it off every month and never carry a balance?


Just going off of others and in my own practice that I had to learn after my BK7:

 

- You have a due date. you get reported if you miss it, or if you pay on time
- You have a statement cut date. Your balance on this statement, and EVERY statement, is reported to the credit bureaus. 

if your goal is to get the lowest utilization possible, always pay in full (or as much as you can to fall below 8.9%, 28.9%, 48.9% utilization thresholds) BEFORE the statement cuts. That way, your statement cuts with the lowest possible utilization; if it's zero great, but if it's not, pay it by the due date. 

Message 4 of 13
FlaDude
Established Contributor

Re: Utilization Question


@Anonymous wrote:

Hello Everyone! My first time posting on this board. I have a question about utilization. Say for example I have a $1000 credit limit but I use $500 of it every month and I always pay off the $500 on my statement due date. So, I never end up carrying a balance at the end of my billing cycle. Even though I pay it off is it bad to utilize 50% of the credit limit during the month or is it ok because I'm paying it off every month and never carry a balance?


As others have posted, the balance reported to the CBs is based on your statement balance, so paying down before the statement date will help your score. Whether it's really "bad" depends on your score and if you are actually applying for new credit. I've read that FICO 8 has no util memory, so if you plan to apply for credit, you could just make sure you pay before the statement date before applying and not worry about it the rest of the time unless you just like to see scores as high as possible. 

 

You don't mention if you have other cards or not, but there is also a score penalty for all balances reporting zero, so for max score, use the AZEO method, which you can search for here if not already familiar.

Scores: March 21 FICO 8: EX 810, TU 808, EQ 813
AoOA: closed: 36 years, open: 25 years; AAoA: 11.8 years
Amex Gold, Amex Green, Amex Blue, Amex ED, Amex Delta Gold, Amex Hilton Surpass, BoA Platinum Plus, Chase Freedom Unlimited, Chase Amazon, Chase CSP, Chase United Explorer, Citi AA Plat, Sync Lowes, Sync JC Penney - total CL 145k
Loans: Chase car loan (35k/6yrs 0.9%)
Message 5 of 13
Anonymous
Not applicable

Re: Utilization Question


@SouthJamaica wrote:

@Anonymous wrote:

Hello Everyone! My first time posting on this board. I have a question about utilization. Say for example I have a $1000 credit limit but I use $500 of it every month and I always pay off the $500 on my statement due date. So, I never end up carrying a balance at the end of my billing cycle. Even though I pay it off is it bad to utilize 50% of the credit limit during the month or is it ok because I'm paying it off every month and never carry a balance?


Yes it's bad. FICO utilization is based on the reported balance, which is in most cases the statement balance.

 

Example:

A & B each have 1 card with a $1k limit, and each spends $750 a month with it.

For each's account the statement balance is the reported balance.

A pays the account off the day before the statement cuts.

B pays the account off the day after the statement cuts.

 

A has 0% utilization

B has 75% utilization


I understand that FICO is based on the reported balance, but I'm paying off what I'm using before the statement cuts so I'm never carrying a balance. But yet you're saying it's bad to use 50% of my utilization during the month even though I pay it off before the due date?

Message 6 of 13
Anonymous
Not applicable

Re: Utilization Question


@Anonymous wrote:

@SouthJamaica wrote:

@Anonymous wrote:

Hello Everyone! My first time posting on this board. I have a question about utilization. Say for example I have a $1000 credit limit but I use $500 of it every month and I always pay off the $500 on my statement due date. So, I never end up carrying a balance at the end of my billing cycle. Even though I pay it off is it bad to utilize 50% of the credit limit during the month or is it ok because I'm paying it off every month and never carry a balance?


Yes it's bad. FICO utilization is based on the reported balance, which is in most cases the statement balance.

 

Example:

A & B each have 1 card with a $1k limit, and each spends $750 a month with it.

For each's account the statement balance is the reported balance.

A pays the account off the day before the statement cuts.

B pays the account off the day after the statement cuts.

 

A has 0% utilization

B has 75% utilization


I understand that FICO is based on the reported balance, but I'm paying off what I'm using before the statement cuts so I'm never carrying a balance. But yet you're saying it's bad to use 50% of my utilization during the month even though I pay it off before the due date?


'Carrying a balance' means not paying everything by the Due Date.

 

Paying before the statement cuts will lower your Reporting Balance - the balance that shows on your credit report.

 

During the cycle - from one statement date to the next - use that card as much as you want, but you'll want to pay some down before that statement date if you are concerned with scores for something.

Message 7 of 13
FlaDude
Established Contributor

Re: Utilization Question


@Anonymous wrote:


I understand that FICO is based on the reported balance, but I'm paying off what I'm using before the statement cuts so I'm never carrying a balance. But yet you're saying it's bad to use 50% of my utilization during the month even though I pay it off before the due date?


The reported balance is the statement balance, this is what CC companies report to the credit bureaus. If you are paying after that, your lender would know that, but the CBs wouldn't so other lenders wouldn't know.

 

The major exception is Chase, they do a mid cycle report any time the balance is paid to zero.

Scores: March 21 FICO 8: EX 810, TU 808, EQ 813
AoOA: closed: 36 years, open: 25 years; AAoA: 11.8 years
Amex Gold, Amex Green, Amex Blue, Amex ED, Amex Delta Gold, Amex Hilton Surpass, BoA Platinum Plus, Chase Freedom Unlimited, Chase Amazon, Chase CSP, Chase United Explorer, Citi AA Plat, Sync Lowes, Sync JC Penney - total CL 145k
Loans: Chase car loan (35k/6yrs 0.9%)
Message 8 of 13
Anonymous
Not applicable

Re: Utilization Question

 


@Anonymous wrote:

@SouthJamaica wrote:

@Anonymous wrote:

Hello Everyone! My first time posting on this board. I have a question about utilization. Say for example I have a $1000 credit limit but I use $500 of it every month and I always pay off the $500 on my statement due date. So, I never end up carrying a balance at the end of my billing cycle. Even though I pay it off is it bad to utilize 50% of the credit limit during the month or is it ok because I'm paying it off every month and never carry a balance?


Yes it's bad. FICO utilization is based on the reported balance, which is in most cases the statement balance.

 

Example:

A & B each have 1 card with a $1k limit, and each spends $750 a month with it.

For each's account the statement balance is the reported balance.

A pays the account off the day before the statement cuts.

B pays the account off the day after the statement cuts.

 

A has 0% utilization

B has 75% utilization


I understand that FICO is based on the reported balance, but I'm paying off what I'm using before the statement cuts so I'm never carrying a balance. But yet you're saying it's bad to use 50% of my utilization during the month even though I pay it off before the due date?


@Anonymous remember if you don't report at least one balance you will have an AZ penalty of 10 to 20 points. 

Message 9 of 13
SouthJamaica
Mega Contributor

Re: Utilization Question


@Anonymous wrote:

@SouthJamaica wrote:

@Anonymous wrote:

Hello Everyone! My first time posting on this board. I have a question about utilization. Say for example I have a $1000 credit limit but I use $500 of it every month and I always pay off the $500 on my statement due date. So, I never end up carrying a balance at the end of my billing cycle. Even though I pay it off is it bad to utilize 50% of the credit limit during the month or is it ok because I'm paying it off every month and never carry a balance?


Yes it's bad. FICO utilization is based on the reported balance, which is in most cases the statement balance.

 

Example:

A & B each have 1 card with a $1k limit, and each spends $750 a month with it.

For each's account the statement balance is the reported balance.

A pays the account off the day before the statement cuts.

B pays the account off the day after the statement cuts.

 

A has 0% utilization

B has 75% utilization


I understand that FICO is based on the reported balance, but I'm paying off what I'm using before the statement cuts so I'm never carrying a balance. But yet you're saying it's bad to use 50% of my utilization during the month even though I pay it off before the due date?


No, it's ok to use whatever you want as long as your reported balances are where you want them to be. They shouldn't all be zero; one should report a small balance before you pay it off.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 10 of 13
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