Hi all, I have a question that I'm sure was answered a while back, but I can't find it through a search so forgive me if this is a repeat. If you get a card with a high annual fee of $149 and a credit limit of $300, won't it hurt your score because you've used 50% right off the bat? Maybe I'm not sure how this works. When does the 50% utilization get reported? If the balance carries over? As long as the limit remains at $300? If you pay it off as soon as you get it, will it still show that you've had that balance at one point? Thanks for any help.
Everything depends on when the account reports. If you get a card with that high of utilization due to fees ect, and the fees are paid right away but the account dosent report until several days later then it won't show. If it reports immediatly with a high utilization and you pay it off right away, then it will show the new balance on the next reporting cycle. In all you question is sort of puzzeling. If your opening a new account and the card has sub-prime fees such as you described, your score may take a hit for the new account and the utilization, no one is certain exactly which will be worse. Either way, and the point is, if your opening the new account don't worry about the hight utilization for the first month. The account will need to age some before it really begins helping your score. If you are in a position where your on the borderline for something and you need a few points to put you over the edge, opening a new account may not be the best option. As far as I can tell, when opening new accounts, expect to take a slight hit immediatly (for the hard inq and the newness of the account) and plan on a slow recovery that eventually (with good payment history) will leave you better off than you were.
There is a FICO utilization cut off at 50%, so like woops said, it depends on what is actually being reported. At 149/300, that is slightly below the cut off, so it would not be quite as bad as if it were just above 50%. FICO generally likes lower utilization, so yes, 10 or 20% would be better, FICO wise. But the credit card company does this to make money and help you build credit, which is why they sometimes offer options for you down the road.
