Hi DirtyRatt (haha... great username 
) - Welcome to the forums!
@Anonymous wrote:I am having a difficult time understanding how the utilization ratios can neatively effect ones score. Particularily when a slight increase in account balance across my 2 CO cards dropped my score 10 points for EX and 11 for TU.
I have been dilllegently trying to repair and rebuild my credit for the last 8 months since filing for bankruptsy. I have 2 CapitolOne cards with $500 balances each. I do understand that our scores can fluctuate and many factors go into calculating them. I was told, read many articles and watched countless videoes about repairing credit and almost all say to A.) Pay off balances in full every month to avoid interest charges. B.) keep a low utilization ratio below 30% but below 10% is best. Among other tips and pointers
I have been keeping my utilization as low as possible by both making periodic payments throughout the month but also keeping the balance on both my cards very low when the bill is generated around the 24th of each month. I paid both my card balances down to $40($36 last month) on one card and $28($0 last month) on the other. Two days later, after my cycle ended and my score decreases? Am I missing something? I get the importance of paying the balance down, but do I need to be below the previous months balance to avoid a negative reaction? Does the balance have to be $0?
CO $28/$500
CO-$40/$500
self lender loan $89/$1000 opened 2/25/19
You're utilization is fine (only 6.8%) -- seems you may have lost points for having 'too many accounts with balances.' I know it seems odd, but FICO will ding you a bit for having too many of your revolving accounts with a balance -- and since you only have 2 revolvers, you showed 100% of your revolving accounts with a balance as opposed to last month, when you had 50% showing a balance. The ideal (for FICO) is to have only 1/3 of your revolvers reporting a balance -- that is why many will advise that you have 3 open CCs and 1 installment for maximum FICO scoring; this will allow you to have one card report a balance while the other two are at $0, which will equate to only 1/3 of your cards reporting a balance and you will not be dinged the additional points. So - you may want to consider getting a third card.
Good news -- it really doesn't matter if you're not preparing to app for anything (I know you're rebuilding so 10 points is like the whole world but...I'm just saying). You can just use your cards and pay them while keeping overall utilization below 8.9% and individual utilization below 28.9% and don't worry about the small dip in scores. If you decide you want to app for something, then prepare your reports the month before by bringing one card to $0 and allowing the other to report only a small balance and you'll regain those points -- it's a bit easier to handle the dip in score when you know in the back of your mind that those extra points are available when you need them. Right now, I'm in the garden so I let all my cards report naturally - knowing that my scores are about 20 points lower than they would be if I paid down all my balances and only let 1/3 of my cards report- but it's not worth the extra hassle when I'm not apping for anything...
@Anonymous wrote:If so, how can I have a payment to make on time the following month? I have to retain SOME small balance on the card in order to have something to pay on to keep my payment history current and to show on time payments, correct?
As far as the above statement.... No, you don't have to have a balance every month.
1. If you, for whatever reason, don't use your card at all one month and have no previous statement balance, it will report $0 to the bureaus along with a 'PAID' notation for that month.
2. You don't have to have a statement balance in order to have something to pay by the due date. You can pay your card to $0 before your statement cuts so it reports $0 to the bureaus; then start using your card again as usual -- these new charges will be considered your 'current transactions' -- which you can then pay off or down later that month before your next statement cuts, or - you can opt to let those charges report to the bureaus and then pay them by the due date.
If you pay off your current transactions before the statement date, then you will never have a 'statement balance' to pay by the due date, but you'll still always have the option to make a payment towards your current transactions for that billing cycle. If you choose to wait until the due date to pay your current transactions, then those transactions will be your 'statement balance' -- and a payment towards that statement balance will be due by the due date.
I know this can be confusing so... let's pretend your CapOne card has a billing cycle of 3/27 - 4/28; with a due date of 4/21:
You paid the balance down to $0 prior to the statement date of 3/27 so that it reports $0 to the bureaus. Since your statement balance is $0, you are not required to make a payment by the 4/21 due date. However, you decided to use the card again after 3/27 (during the billing cycle of 3/28-4/27) so now you have new charges -- and you want the card to report $0 again on the next statement date which will be 4/27. So, you can make another payment prior to 4/27 to bring that balance to $0. Now you will have no 4/27 statement balance and will not be required to make a payment by the next due date of 5/21.
Now-- what if you decided not to pay the charges you made between 3/28 and 4/27 and instead let the card report that balance for 4/27 statement? A payment for that statement balance will now be due by the next due date, which is 5/21. Any new charges made between 4/28 and 5/27, plus any remaining balance from the previous 4/27 statement (if you did not pay that statement balance in full on 5/21) will become your 5/27 statement balance, which will be due on 6/21.
Make sense?
@Anonymous wrote:I am having a difficult time understanding how the utilization ratios can neatively effect ones score. Particularily when a slight increase in account balance across my 2 CO cards dropped my score 10 points for EX and 11 for TU.
I have been dilllegently trying to repair and rebuild my credit for the last 8 months since filing for bankruptsy. I have 2 CapitolOne cards with $500 balances each. I do understand that our scores can fluctuate and many factors go into calculating them. I was told, read many articles and watched countless videoes about repairing credit
Actually most of that stuff is misleading. The best place to learn is right here in this forum.
and almost all say to A.) Pay off balances in full every month to avoid interest charges.
Sure that's a good idea, but it begs the question: when to pay in full? before or after the statement cuts?
B.) keep a low utilization ratio below 30% but below 10% is best.
Not so. Keep individual utilization below 28% and aggregate utilization below 9%. And remember that utilization is computed as of the reporting date, which is usually the statement date, but not always, depending on the particular lender. With Capital One it is the statement date. These percentages won't totally optimize your utilization, but they're close enough to optimal to make sure you're not getting hurt.
Among other tips and pointers
I have been keeping my utilization as low as possible by both making periodic payments throughout the month but also keeping the balance on both my cards very low when the bill is generated around the 24th of each month. I paid both my card balances down to $40($36 last month) on one card and $28($0 last month) on the other.
With 2 cards you would do better, scorewise, by having 1 of the 2 report a zero balance. If the other one is at $40, which in your case is 8%, you're fine.
Two days later, after my cycle ended and my score decreases? Am I missing something? I get the importance of paying the balance down, but do I need to be below the previous months balance to avoid a negative reaction?
No, utilization has nothing to do with what's happened in the past. It's a snapshot of what's in the moment.
Does the balance have to be $0? If so, how can I have a payment to make on time the following month? I have to retain SOME small balance on the card in order to have something to pay on to keep my payment history current and to show on time payments, correct?
No you don't.
What is the best amount to keep low limit cards when building credit that will not negatively effect my score?
As I mentioned above, in your case the optimal numbers would be for one statement to report zero and the other to report $40 or a little less.
Any information would be most welcome.. Thanks in advance.
CO $28/$500
CO-$40/$500
self lender loan $89/$1000 opened 2/25/19
@Anonymous wrote:
Thanks for all the tips guys. I guess I didn't realize that having a small balance on BOTH cards would cause that. Aggregate utilization is something I just recently learned about. I will be more mindful about that going forth.
I am aware that a third card is wise but I was hoping to hold off until my credit score allowed for a better solution then what I currently qualify for.. I appreciate all the great advice..
You don't want to apply for a 3rd card at this time. That won't help you at all.