Ideal Utilization Rate?

[Determined1]

Hi,

I have several cc's and trying to raise my score this month. I have read that keeping the utilization rate under 35% is important, but what % is the best from 0 - 35% ? For example, is my score better if I pay off everything each month, or keep 5% debt...10%....20%...? Is there an ideal % here to maximize this issue on a credit score?

Thanks!

[hajimon]

good question

utilization should be kept @max 30% so an example, I have a new 300 orchard bank card. So my max utilization is $90(30%). Well I have another story behind that as well, I was approved for this OB card at the end of feb,

I was so excited so when i was approved on that same day i called ob to get my card number wouldnt give it on the phone but they told me my limit was 300 but when i received it the balance was going to be $229 because of the annual $79 fee. So I told the rep that I wanted to do a chex by phone so when i received the card it would have the full balance, she tried to talk me out of it, because their was a $12.95 chex over phone charge. so I started not to do it then I thought if they are going to charge me 12.95 thats gonna charge to the card and not my bank. So I did the chex by phone, and like I anticipated the 12.95 fee was charged back to the card.

By this time I had just received the card so I went online activated it and setup online payment and paid the 12.95 fee charge off bring my account back to the full$300.

Well here we are to the fun part, finally, i know, 4 days later the new card reported to tu and eq, with the 12.95 as the high balance.

Then I pulled my fico for tu and my score shot from 575 to 651, and from my best estimation it was due to the 4%utiliation of this new credit card.

So remember that low utilization means one thing to lenders, frequent use shows solid credit worthiness. These lenders wnat to see utilization under 30%, thats why we find that it is better to make 3 $1000 payment in 3 weeks on a 3000 balance, than to make a straight $3000 payment. So the more you pay on your balance the lower your utilization will report to the cra's

stability is the key to dealing with credit. not high balances

mho

h

[willingtocope]

Urban credit legend says 30%...

On the other hand...as far as revolving credit is concerned...the WTC principle says...0%.

IMO, credit scores are NOT what we think they are. They're not a measure of how well you're doing, or how much money you can borrow, as much as they measure how much money the creditor can expect to make from you. For CC's and the like, they want people who maintain a balance and pay them interest on that balance. Having a 60% utilization doesn't cut your score in half...it only drops by what, 20 points? Why...because the CC's make even more money from you if you owe them more. Their only risk at 60% is that they might have a slightly harder time collecting from you...

Don't stress over it...use credit in a way that makes sense to you. Don't play their game.

[momof5]

While true, you still must be careful.

My fico dropped due to utilization. As a result, my target visa lowered my CL by $200! (I was now a higher risk!) That had the further impact of raising my utilization even higher...further dropping my fico. In the end, I lost 60 pts total.

Now, that is nothing against the 850 max score, but when you are in the low-mid 600's, that will drop you into the 500's....so then you have the wonderful AR with subsequent ratejack! That now costs you $$$.

[hajimon]

Maintaing low utilization often suggest that you stable financiallly to creditors, be it a auto loan, home, re-fi, child's education. If your using over 30% of your limit your living outside your means. Why in the world does it make sense to spend money you have received in the hand first. Credit is a great thing if its used wisely but in the past alot of us havent used it wisely and thats why we are here. Look at my thread characteristics of repairing my credit score. Why do all of these differnet techniques if the the bottom line gets you right back in the same problems. CC's are to be used for emergencies, the unforseen, and not for the 72" plasma tv that u want(hint not need today). Why spend tommorrow quarter on today's dime. Saying things like utilization doesnt matter is like saying i got out of debt once so i can keep doing it again and again. This is why bk is released after 2 years so Creditors can screw you all over again.

My stance is that for me I will budget my life style according to the paychecks I bring home every 2 weeks and not the plastic anti-christ sitting in my wallet.

mho

h

[Determined1]

I think we all have different goals. I am looking to finance something for my business and my credit score will be all important to the lenders. So I am trying to maximize my score. If paying everything down to $0 improves my score, I can do that, and if moving my utilization to 30% helps my score this month, I can do that too (I dont have high limits, its not a major dollar amount one way or the other). So my issue is....how to handle a payment this week and where to peg my utilization....at 0% ? 5% ? 15%? 25% ? etc...

for the best impact on a credit score.

[momof5]

I am definitely not sure what is the ideal utilzation, but 0% is not the answer. 0% makes your cards appear "dormant" to fico. You have to have at least something on the cards....the less the better, I think.

[Tried]

My SO has 3 or 4 high limit CC's, uses them regularly and always pays BIF as soon as the bill comes and so carries $0 balance.

He decided to get a new truck a couple years ago wearing ragged jeans, t-shirt and flipflops, when he brought up $$ out the door and interest rates etc, the finance guy said "wait while I check your credit", he just said "you go do that".

The finance guy came back , his score was 824 , end of bargining.

His advice for building credit is:

1. live below your means

2. save $500 and buy a CD, borrow $500 against the CD, put that $500 into another CD, make the payments on the loan on time. When the CD's mature buy a $1000 CD, borrow $1000........etc.

3. only use credit cards for something you have $ in the bank to buy and pay the BIF every month.