Available credit usage

[jlmaca]

I have just received a Capital One card with $500 credit and a Hooters card with $500 credit. I've read where you should only use 1/2 of the maximum available credit in order to improve your score. If I use the maximum amount in one month and pay it down 50% does this count as 50% usage or should the balance never go beyond 50% in any billing cycle?

[Logan]

I wouldn't go above 30% usage. The lower the better.

Logan

[IBroke]

Believe it or not - even 30% is way too high if you want to squeeze the maximum out of your FICO.

If you have a $500 Hooters and a $500 Cap One card, pay one of these cards off and keep a balance between $10 and $30 (1-3%) on the other. This is the best solution possible because it keeps the credit used at the best value AND you only have a balance on 1 account rather than on 2. This makes a difference as well.

At the beginning, I only had one CC with a limit of $300. A reported balance of $6 delivered the highest FICO.

[dumpinmydebt]

Never max it out, ever!!!!

Spend no more than 20% (though I would certainly spend less as IBroke suggested), wait for a bill, then pay it off. I don't suggest carrying a balance.

The more available credit you have on your credit report, the better.

Not that I don't think a $6 balance would really hurt much.

[IBroke]

Not that I don't think a $6 balance would really hurt much.

Yeah, a human being wouldn't mind if it's $0, $6 or $16 - but we all know that a crazy computer formula is calculating the score. Before my mother got our mortgage, she needed a 680 Fico-score. $0 balance didn't work, $100 was too much - the Fico-simulator suggested $6 - and voila, as soon as it was reported by the creditor, she had the required 680.

[bigtim6656]

wow amazing how alittle playing around with balances could do that much

[IBroke]

wow amazing how alittle playing around with balances could do that much

Yes, especially if you only have one or two CCs with low credit limits. The amount of available credit is far less important than the credit usage, meaning an individual with a $100K limit on a credit card and a $40K usage would not score as good as somebody with a $300 limit and the $6 usage. Sounds crazy but that's what I discovered..

[dumpinmydebt]

Yeah, a human being wouldn't mind if it's $0, $6 or $16 - but we all know that a crazy computer formula is calculating the score. Before my mother got our mortgage, she needed a 680 Fico-score. $0 balance didn't work, $100 was too much - the Fico-simulator suggested $6 - and voila, as soon as it was reported by the creditor, she had the required 680.

That's hilarious.

[jlmaca]

Yes, especially if you only have one or two CCs with low credit limits. The amount of available credit is far less important than the credit usage, meaning an individual with a $100K limit on a credit card and a $40K usage would not score as good as somebody with a $300 limit and the $6 usage. Sounds crazy but that's what I discovered..

Please explain "credit usage". Would that be the maximum dollar amount used on the card before the statement date? Or the amount that is left on the card after making a payment. I'm trying to figure out if I have a card with a $300 limit and I use "usage"? $250 but pay all off except the recommended $6 is that what you refer to? Or did you mean simply only using $6 during the entire statement period? I hope this is not too confusing.

[IBroke]

Please explain "credit usage". Would that be the maximum dollar amount used on the card before the statement date? Or the amount that is left on the card after making a payment. I'm trying to figure out if I have a card with a $300 limit and I use "usage"? $250 but pay all off except the recommended $6 is that what you refer to? Or did you mean simply only using $6 during the entire statement period? I hope this is not too confusing.

Oh, not at all. I see what you mean.

During the month, you can use the card as much and as often as you want - even max it out to the entire limit of $300 - just make sure that the balance on the card is $6 when the billing cycle closes (aka the statement-date). That is the balance that will be reported.

It is sometimes a bit complicated to reach the planned balance because some charges are applied to the account the same moment the statement is generated (monthly fee and/or interest). These charges have to be anticipated and considered when making the payment shortly before the billing cycle closes.

[jlmaca]

Oh, not at all. I see what you mean.

During the month, you can use the card as much and as often as you want - even max it out to the entire limit of $300 - just make sure that the balance on the card is $6 when the billing cycle closes (aka the statement-date). That is the balance that will be reported.

It is sometimes a bit complicated to reach the planned balance because some charges are applied to the account the same moment the statement is generated (monthly fee and/or interest). These charges have to be anticipated and considered when making the payment shortly before the billing cycle closes.

Ok, so it all boils down to paying down the card at least one day BEFORE the statement date. I've also seen a reduction of this "free float" time from 30 or so days down to 23 or so. Do we get a statement every 23 or so days?

[IBroke]

Ok, so it all boils down to paying down the card at least one day BEFORE the statement date. I've also seen a reduction of this "free float" time from 30 or so days down to 23 or so. Do we get a statement every 23 or so days?

I highly doubt it. Statement dates are always close to 30 days. Sometimes, they are 28 days apart and sometimes 32 - but I haven't seen 23.

You might be talking about the grace period on a CC-account. Those periods can vary depending on the card issuer. But the statements are monthly statements - so they are issued a month apart.

[Logan]

I highly doubt it. Statement dates are always close to 30 days. Sometimes, they are 28 days apart and sometimes 32 - but I haven't seen 23.

You might be talking about the grace period on a CC-account. Those periods can vary depending on the card issuer. But the statements are monthly statements - so they are issued a month apart.

The float is from the statement close. I am making a few thousand dollars in purchases for my new baby and we waited until the 28th of August to make these purchases since the float will be all the way until Sept. 21.

I get 1.25% cash back, I get cash rewards for most online purchases above the cash back (1% to 4% rewards) and I get 4% interest in my checking account which the money I'm floating will stay in the account until Sept. 21.

Floating is a beautiful thing!

Logan

[Logan]

Where it says Sept 21 should read Oct 21. Makes about a 50 day float on about 3K for me and my wife.