Comments on: What is Credit Utilization?

By: Kevin@OutOfYourRut

Kevin@OutOfYourRut — Wed, 02 Dec 2009 19:11:45 +0000

Saladdin–that advice is more for people who are trying to develop their credit. Once you have an established credit profile, having too many accounts can work against you.

There’s much talk about credit utilization, but another component of credit scores is number of accounts open. Too many is a negative. Better a few well managed accounts than 15 pages of open but inactive accounts.

By: Chris

Chris — Wed, 02 Dec 2009 18:12:18 +0000

I run all monthly expenses through my rewards card and make a few payments a month to try to keep the balance low. Delicate dance of credit utilization vs available credit.

By: otipoby

otipoby — Wed, 02 Dec 2009 14:38:21 +0000

Another option to lower your credit utilization is to pay off the balance twice a month (or more). This way, you can use your cards, payoff every month, and still have low utilization.

By: NateUVM

NateUVM — Wed, 02 Dec 2009 14:25:56 +0000

@ saladdin – Have you tried to get an increase in your credit limit? Are you in a position to request one? Or, is it a way that you have found to self-regulate your expenses? Would you just spend to your new maximum if your credit limit were to increase?

Just curious. $1,000 limit seemed overly restrictive, in your case.

By: NateUVM

NateUVM — Wed, 02 Dec 2009 14:21:53 +0000

Pay it off. Carrying a balance is outdated advice that was based on misinformation and was when carrying at least some revolving debt wasn’t seen as being so detrimental to one’s overall financial health.

By: saladdin

saladdin — Wed, 02 Dec 2009 11:00:15 +0000

Nope. I have a $1000 limit card. I charge that to max every month but pay it off. I have not paid cc interest in 15 years. But they report balances before my payment hits my account so in my credit report it looks like I have 1000 charged on a 1000 limit which hurts my score.

It’s a timing thing.

saladdin

By: aua868s

aua868s — Wed, 02 Dec 2009 08:27:05 +0000

i was under the impression that no matter what my credit utilization is, as long as i pay my balances in full and on time my credit score would not be hit…thanks for the eye-opener.

By: eric

eric — Wed, 02 Dec 2009 03:11:18 +0000

Good post…lots of people are confused about credit utilization, especially when it pertains to canceling cards and such. Helps demystifies the subject!

By: Jim

Jim — Wed, 02 Dec 2009 01:59:42 +0000

I don’t think getting a small loan just for the purposes of improving your score makes sense. After a certain point, your score is “good enough.” Why pay interest to get it marginally better?

By: saladdin

saladdin — Wed, 02 Dec 2009 01:47:12 +0000

I know some people who get a small loan every few years just to add a new tag line. It is possible for this to help but you would be paying ( through interest) for a FICO score. Not a good trade off for me.

saladdin

By: saladdin

saladdin — Wed, 02 Dec 2009 01:45:25 +0000

Sorry dude.I thought you were being sarcastic.

Your credit report can still show a balance reported based on when you cc company reports and when you pay. Mine does all the time. Remember, a portion of your score is utilization. If you utilize more your score suffers so carrying a balance can hurt.

saladdin

By: Minority Fortune

Minority Fortune — Tue, 01 Dec 2009 23:00:11 +0000

It’s definitely advantageous to credit card companies and banking institutions to suck as much interest from their customers as possible. There’s nothing in it, credit or benefit wise, for the consumer.

Credit utilization is an often forgotten component of our credit scores. This post serves as a great reminder of that.

By: Anthony

Anthony — Tue, 01 Dec 2009 21:03:04 +0000

@hoht: I hear these things all of the time. Why carry a balance?

More importantly, I know your credit score is an overly important 3-digit number, but some go into debt trying to improve your score!

Someone once told me that carrying 20% to 30% of your limit is ideal. Umm no, it’s ideal if I pay it off every month!

By: Jim

Jim — Tue, 01 Dec 2009 19:39:12 +0000

Only credit card companies want you to carry a small balance.

By: hoht

hoht — Tue, 01 Dec 2009 19:30:37 +0000

Thanks guys!