Does this have a better/worse or neutral impact on a credit score? Running up the credit limit but paying it down rather quickley showing that you use the card over 50 % but you make huge payments on it. or Keeping the balances under 50 percent without ever going over Thanks Diane
Hi Diane, The average appears to be about 33% utilization. I wouldn't go over that between billing cycles. I use a CC in business and go through about $4,000 - $5,000 a month. As long as I pay by the due date, in full, it always shows as 0% utilization.
Here's my experience: It depends on the CC: If it's Cap1 for example, they report within a week after your due date, so if you pay before then it will report your lowest balance (after you pay) but this doesn't consider at all how much you paid, only your current balance. Also, using Cap1 as an example, some CC don't report a CL, they only report what your highest balance has been, and therefore your score is in part based on the current balance against this number. In addition, the most beneficial utilization that has been discussed in the news and other articles recently is actually 22% up to 34%. The 50% number is a couple of years old already, but still much better than anything greater. It may be to your benefit to once or twice a year run your cards up to the limit and then pay them down considerably that same month so that you can request a higher limit from the creditor. After achieving the limit you want, keep them at around 22% utilization. Just charging up and paying down to under 50% in of itself will not help your score. Hope this helps
This is a little off the topic, but what is the use of having a credit line if you can only actually use a very small percentage of it? In some ways it seems that you would do just as well with an American Exp or Diners Club open account where you can charge what you charge more-or-less what you want and then pay it back next month. Having limits that you cant really use seems silly--what is the purpose of having them?
My thoughts exactly. I have always wondered this as well. However I think there is some logic to this. In my opinion the credit game seems to have changed over the years. It used to be that having high credit limits was a big NO-NO even if you did not charge anywhere near the limit because when it came time to apply for a mortgage or something they would see you credit limit as something you could go out and run up after you got approved for a mortgage. But now, (and I could be wrong) high credit limits are looked at as more of a postive thing because potential creditors see that you actually qualifyed for credit increases and perhaps qualifyed for a Platinum card because you handled credit responsibly. Also, as your limit increases you can put more utilization on your card yet no be so limited by your credit limits. I recently was turned down for a CC because I had $525 on a card with a $750 credit limit. But if my limit was $1500 I would not have been penalized. It was not about how much debt I had but about the credit limit.
