Utilization Questions

[kberly69]

How is utilization reported? I have a new low limit card ($500) from the grocery store where I do the bulk of my shopping. My budget is $325 for my next trip and I was wondering which is better and why:

• Purchase my full amount of groceries on the card and walk immediately over to customer service and pay it (do I end up with 0% utilization this way? Or 65%)
• Put,say $50 on the card and wait to pay until I get the bill?

[justbroke]

Utilization is determined by credit scoring systems, not the credit card issuer. On the day that the issuer sends the payment history to the credit bureau(s), which is typically monthly, they will send your statement balance and your credit limit. The credit scoring models then use the statement balance divided by your credit limit to determine utilization.

The key is knowing when the statement is going to be cut. In some very limited cases, some creditors report the balances and limits on a different date than the statement being cut! I had one creditor that cut statements on the 14th but didn't report until the last day of each month.

So paying immediately will give you 0% if the statement is prepared while you have no balance. If you are trying to "carry a balance" of less than 30%, then I would keep the balance below $100 when the statement gets cut. Some creditors like to see that you are actually handling the "revolving" nature of credit cards.

[LadyInTheRed]

In monitoring my FICO scores lately, I find that keeping utliziation below 10% is best. As soon as I go over 10%, my scores drop a couple of points. Not that a couple of points make a huge difference unless you are right on the edge of a creditor's requirement for granting credit. On the one occassion I went above 30%, my scores dropped even more.

[kberly69]

Thank you both! Somewhere in researching this, I saw a chart that showed the relationship between credit score and utilization. It said the best place to be was between 1-10%, then 11-20, then 21-30% . 0% was actually about the same as the 30% bracket. Fascinating and maddening all at the same time...

[kberly69]

Do I look at utilization across cards, as a whole, or individually? I mean, can I be at 30% utilization on one and 2% on another and be seen as having 16%? As I'm typing this I'm thinking probably not due to what justbroke said about the timing of different cards showing up on reports.
I never knew the intricacies of credit reports before my bankruptcy and it makes me realize I need to sit my kids down and teach them the ways of good credit.

[justbroke]

As far as I know, the credit scores look at both individual account utilization and combined utilization. That's why the formula is so hard to predict.