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Quick question about utilization

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I have two credit cards. Would it be better for my credit rating to keep the balances on them at $0 or to make small purchases on them and pay in full each month?

Maximum Fico utilitzation is between 1-9%, so it's recommended by keeping a small balance on the card. Paying them off in full each month would be the same thing as keeping it at 0. The only thing you do by paying them off in full, other than paying interest, is showing the CC company that you use the card and keeps it from being closed for non-use.

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You know, I've never actually looked at my fico scores when I had all my cards paid off and thought "gee, I wonder what my score would be if I owed someone a little money". That never made sense to me. But, supposedly it helps your score.

What I do know is that high utilization sucks! Discover reported to the bureaus at the worst possible time in between a few large purchases I had made to rack up reward points, and for the heck of it I checked my EX score and it was down over 40 points! And my utilization was at about %50 of total available credit.

I figured that would be worse case scenario for me.... and I was right.

Eddie

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Oh crap, here he goes again...

What score? The FAKO's and the FICO you're allowed to see are closest to the FICO Bank Card score...in other words, the score that CCs use to predict who they will make money off of by charging interest and occasional over limit or late fees. "Utilization" tells them that.

Your best interest is served when you have 0% utilization.

Read my signature....

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Oh crap, here he goes again...

What score? The FAKO's and the FICO you're allowed to see are closest to the FICO Bank Card score...in other words, the score that CCs use to predict who they will make money off of by charging interest and occasional over limit or late fees. "Utilization" tells them that.

Your best interest is served when you have 0% utilization.

Read my signature....

Good point WTC, Manage your Debt and not your Credit Score. Credit follows suit with responsible borrowing and paying.

I have heard though that FICO is a measurement of debt, a "Stay in Debt Score" if I remember right from someone on this forum a while back. So, if you have (just an example) 5 credit cards with $5,000 limits, but EVERY time the card reports to the BIG THREE it says $0.00 (you still use your card every month, but pay it off in full, to make sure they don't lower your limit or close your card for non-use) that would not hurt your credit score, it would actually sustain/build it?

Also, one question I was concentrating on over the past couple weeks that I wasn't sure of, is if you go to buy a car today for instance, and they run a credit check, and 2 months ago you had all your credit cards maxed out, but when you went to buy the card you were COMPLETELY out of debt... would they be able to see your utilization or effect of credit-debt ratio before approving you for a car loan (into the past), or would it only display CURRENT ratings and utilization etc at that point in time?

THANKS! :mrgreen:

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Here's how I look at it. If you play the FICO game, eventually you will lose one way or another. It's one thing to try to establish some credit to get you to a goal (such as a home purchase), it's another to become consumed with the number and somehow become convinced that you have to have a perfect FICO score, or that the FICO score is somehow a measure of who you are. You get stuck in a cycle of getting more credit to get a higher number to...get more credit? Why? So you can live way beyond your income and eventually end up here asking how to clear off tens of thousands in credit card debt?

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Here's how I look at it. If you play the FICO game, eventually you will lose one way or another. It's one thing to try to establish some credit to get you to a goal (such as a home purchase), it's another to become consumed with the number and somehow become convinced that you have to have a perfect FICO score, or that the FICO score is somehow a measure of who you are. You get stuck in a cycle of getting more credit to get a higher number to...get more credit? Why? So you can live way beyond your income and eventually end up here asking how to clear off tens of thousands in credit card debt?

I know where you're coming from with your post, because I believe that is how most people are as I have witness on a dialy basis at my profession, but it certainly isn't me. I truly wouldn't mind if my credit limits were never increased for the rest of my life, I am not looking for or in need of credit in any way shape or form, every one of my cards currently has a $0.00 balance. We haven't even been to a movie since we've been married we live by such a tight budget with an eventual ambition and 6 year envisioned plan.

All I was asking was is if you go to buy a car today for instance, and they run a credit check, and 2 years ago you had all your credit cards maxed out, but currently have all revolving accounts at $0.00... would they be able to see your utilization or effect of credit-debt ratio before approving you for a car loan (into the past), or would it only display CURRENT ratings and utilization etc at that point in time, and that be all they are concerned with?

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To answer your question. If you go apply for an auto loan today- the report/score they see is a snapshot of TODAY- it will include your balances as they were last reported by each tradeline you have. Keep in mind that utilization is only part of the score- past lates/chargeoffs etc. will be seen and will effect your scores.

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To answer your question. If you go apply for an auto loan today- the report/score they see is a snapshot of TODAY- it will include your balances as they were last reported by each tradeline you have. Keep in mind that utilization is only part of the score- past lates/chargeoffs etc. will be seen and will effect your scores.

Gotcha! I gave you a little reppage ;)

Good to know, since I've never been late or had any charge-offs or collections on cards, I should be fine. Only thing that is keeping me from really shooting into the 750's-800's is that I don't have a car-loan or mortgage I am paying on, and I'm not into my 40's yet. OH well, no one is perfect Fair Isaac, hahaha :)

It's good to know that past debt-credit ratios and high limit's are taken into consideration when applying for a car loan!!!!!:mrgreen:

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I know where you're coming from with your post, because I believe that is how most people are as I have witness on a dialy basis at my profession, but it certainly isn't me. I truly wouldn't mind if my credit limits were never increased for the rest of my life, I am not looking for or in need of credit in any way shape or form, every one of my cards currently has a $0.00 balance. We haven't even been to a movie since we've been married we live by such a tight budget with an eventual ambition and 6 year envisioned plan.

All I was asking was is if you go to buy a car today for instance, and they run a credit check, and 2 years ago you had all your credit cards maxed out, but currently have all revolving accounts at $0.00... would they be able to see your utilization or effect of credit-debt ratio before approving you for a car loan (into the past), or would it only display CURRENT ratings and utilization etc at that point in time, and that be all they are concerned with?

I was referring more to the OP and the general concept of trying to manage your FICO score. Sorry about that. I didn't mean to make it sound like I was accusing you of living way beyond your means. If you pay your bills on time every time (even if you have a checkered credit past), and aren't using your credit cards as part of your income, you should have little problem getting a loan should you want one. I would never recommend financing a car, though. It's an extraordinarily poor use of borrowed money. I'm in the "borrow money for a house only" club.

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I was referring more to the OP and the general concept of trying to manage your FICO score. Sorry about that. I didn't mean to make it sound like I was accusing you of living way beyond your means. If you pay your bills on time every time (even if you have a checkered credit past), and aren't using your credit cards as part of your income, you should have little problem getting a loan should you want one. I would never recommend financing a car, though. It's an extraordinarily poor use of borrowed money. I'm in the "borrow money for a house only" club.

I understand where you're coming coming from with the mortgage only school of thought; it would be the ideal situation. The eventual goal I mentioned earlier all revolves around a down payment on a home, we want to have the full 20% to show responsibility, and to avoid the insurance spike, and also perhaps receive a more competitive rate based on the 20% paired with our FICO.

Unfortunately, at this point in time, it isn't feasible to pay cash for a vehicle, at least not one that is a couple steps above the proverbial high-schoolder's first car from the corner lot with 150k miles and past body work, lol :p. It isn't an emergency situation by far, but our current vehicle has seen much, much better days. I am afraid of that "game over" scenario, where we break through the threshold of the car demanding more money in repairs, than it would cost as a monthly payment simply to purchase a new one :cry:.

My thoughts on the situation are torn; I would like to be able to purchase the vehicle this June, but in all reality, it might not be until April 2010. Waiting until next Spring will offer several advantages such as no inqueries of any kind on credit report, another solid year of credit history, and another increase in income due to the annual raise... BUT, I am afraid that all of these "the sky is falling" 0% financing + incentives/employee pricing deals will vanish into the night within the next year.

Thoughts LBW, or anyone? (If we can purchase a new vehicle that comes with a good warranty and I can borrow the money for free, is it still a waste of money; or is there always a better reason simply to pay cash?)

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