So, i got approved for my first card and thankfully it was not secured. I'm gonna need that $ for PFD and negotiations later on. Now that i have this shiny new card i'm reading post & articles with contradictions: How can i keep my Credit Utilization under 10% on a $500 card? I've read that: -You charge up to under the limit but pay off everything each month because it will report $0 to the CRA anyways, which is obviously under 10% -You charge up to under the limit and NEVER CARRY a Balance over 10% to the next month, you pay some interest but it will SHOW a balance that is 10% or under of you credit limit on the CRA reports, otherwise it looks like you never use your card and when other credit card companies check your credit they will think they will be able to make some money off you in the form of interest if you leave a low balance at least -You just never SPEND more that $50 (10%) and pay it off each month so you don't pay interest and the CRA will magically know your "usage" even though your balance is $0 and looks like your not using the card -You have to call your card company and find out what date they report to the CRA and make sure your BALANCE ON THAT DAY shows no more that 10% of you credit limit, other than that feel free to spend more than 10% This is from post on this forum and from other boards and google. I'm freaking confused!!! HELP!
I'm pretty sure the CRA doesn't magically know your usage. I believe that lenders and so forth decide your credit utilization by what is being reported to the CRA. The CR shows your credit limit, as well as your balance. Therefore, if you are being reported as having a $500 card with $450 available to spend, then you are at a 10% utilization. I don't think it matters how much you spend, it only matters how much you are reporting. Here is what I do. I got a $300 secured card about 4 months ago. I linked it to my myFico.com account, so my secured card is charged $12.95 per month. I also linked it to my TU account, which is another 10-12 a month. Then, I cut up the card, and i auto pay the secured card through my bank every month. So, every month, my card is being charged around $30 (which is 10% if it reports to CRA as such) and every month it is paid off. Hope this helps.
Interesting idea by jwpj that could certainly improve your score. If you plan on using your unsecured card for any purchases, however, I would just never carry a balance of more than $50. Make sure each monthly payment gets you under that 10% threshold (and ideally you really don't want to carry any balance). Paying off in full each month makes your life real simple if you're "confused" about credit utilization.
Hey Kam, Just to solidify my point, and what Jason is trying to get accross, I pulled this quote from an MSN Money Article I was just reading. Maybe this will help answer your question a bit: Myth No. 4: "You need to carry a credit card balance to have good scores." Fact: You don't need to be in debt or pay a penny of interest to have good credit scores. Your credit reports and scores don't "know" whether you're carrying a balance or paying it off in full every month. That's because the balance reported to the credit bureaus typically is the balance from your last statement, not what was left over after you got that statement and paid the bill. So you might as well pay in full and save yourself the interest. This myth encourages people to carry unnecessary debt, putting them at the mercy of credit card issuers and eroding their financial security.
Thanks guys, I was mainly thinking that if i got a statement and have a payment due one November 21st but i paid everything off before then that the CRA would get a report saying i had no balance. So from what i'm hearing even if spent $300 on a $500 limit card and i paid it of before the due date, the CRA will report that $300 regardless of if it was all paid off to a $0 balance? So why this fuss about finding out about the exact date when you CC company reports to the CRA, when all that matters is the last statement balance? Just curious for when i move forward because: I COMPLETELY like the idea of just putting myfico.com /credit monitoring service on the card! "set it and forget it" -
Well, I think a better explanation to it is this. If you have a $500 card and a $50 balance on that card, the CRA is going to show that you have a card with an $450 out of $500 available, which is a 10% utilization. The Creditor is obviously going to report at the end of the month (or after whenever your payment is due), so it's important to keep the utilization at 10% OR LESS The CRA doesnt show carrying months, only the current balance. So, let's say you owe $50 for this month, and the creditor reports it to the CRA. Then, next month, the creditor reports $100 to the CRA. There is no way to tell whether you paid the $50 and spent another $100, or if you paid $10 and then spent another $60 next month. Lenders, banks, etc., want to see a utilization of 10% or less. So, if you show a $0 balance every month, there is no way to tell whether or not you used it and paid it all off, or you didn't use it at all. Many credit cards will deactivate after several months of activity, so if you aren't using it, eventually, it'll show.
Based on the fact that your Last Statement that was sent to you had a $50 balance or the balance at the time the CC company reports to the CRA. read below for why i ask.... What they will report matters... Are they reporting the statement they sent you to make a payment on or what is your actual balance on that very day they report. Example: I get a bill on November 1st, it's for $50 due on November 21st. I pay $50 on the bill November 15th, balance is zero. I need to buy 2 tires as an emergency ( i know i can pay it off when my paycheck comes), so i charge $250 on Nov. 20th The Card company reports on the 27th of every month What is reported to the CRA on the 27th of November as my "balance"? -$0 (paid off the last statement balance) -$50 (this was the last statement balance DUE, even though it was paid off by Due date & reporting Date) -$250 (this is what the balance on my card IS ACTUALLY on the date the card company reports to the CRA) Thanks for helping to clarify. I really don't want to screw this up. I can see how hard it is to stay under that 10% mark with card that have low limits, that idea you had for setting it up for only paying the credit services is smart but i still would like to know exactly how this works for later on. Thanks for your patience
If you need a lender to pull your credit that month, then yes, it might matter. But if you're going to pay it off at the end of the month anyhow, then when the next statement comes, your debt utilization will be under 10% again. Your utilization doesnt have to be under 10% EVERY MONTH. It only has to be under 10% when it is pulled. Maybe someone else can jump in who has a better way of explaining this. I think it's getting a little convoluted.
