Questions about card usage and credit score, pretty please

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Sweetclementine
 
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Questions about card usage and credit score, pretty please

Postby Sweetclementine » Thu Dec 17, 2015 4:32 pm

Hi all, we just finished a chapter 13 a year ago and are just now finally able to start rebuilding our credit by qualifying for cards. I tried the Amex blue cash card earlier this year and was declined, but happily a couple of days ago was approved.

I haven't had or used a credit card in many years. So... I have questions about usage and credit scores.

1. I ONLY got this credit card to improve my score and maybe start playing the rewards game. I was planning to max it out each month (it's only $1000 max for now) and then pay it off in full monthly. But I am reading that it is not ok for your credit score if you use more than 20% - 30% of the card limit at a time, EVEN if you pay the balance off every month. Is this true?

2. If no .1 is true above, then what about if I use 20-30% of credit limit weekly and then pay it off weekly... would that make a difference at all and still be good for my credit score?

3. Is it true that if you apply for several credit cards in a span of 24-48 hours, it will only ding your credit once?

Thank you so much, I really appreciate you guys helping a newbie out!
Last edited by Sweetclementine on Thu Dec 17, 2015 8:42 pm, edited 1 time in total.


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9Cline
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Re: Questions about card usage and credit score, pretty please

Postby 9Cline » Thu Dec 17, 2015 6:28 pm

The norm says 20-30% they are talking about the amount being reported to CB each month,ie. you can use the whole limit,but by or before due date pay down to the recommended usage so only that amount reports as bal. on card. Supposedly to max out pts on score it's around 10% or less reporting...
Apping for several cards w/ diff lenders will not count as 1 inq. there are some banks that will use the same HP for 2 cards,but it's not the mortgage or auto rate shopping that fico uses.
Ex. some have said that w/ Amex you can get a charge and revolver using same HP.. can't say for sure never did it...
I'm sure there are others who will have loads of suggestions for you,and know which banks do and do not use same HP for multiple cards....
Also,,you are on the right track to start your rebuild... best thing to do is learn about credit,how it works,what's involved,etc..knowledge does wonders to keep folks from making some silly mistakes... Remember stay patient !!!!!!

Good Luck on your credit journey... :D :D :D
LOWES, DISCOVER-iT, MACY'S-AMEX PREMIER ELITE, AMEX-EDP, AMEX-BCP, CITI-DC WEMC, JCP-PLAT MC, CITI BESTBUY, CHASE SAPPHIRE , CHASE FREEDOM VS, BELK ELITE, HOME DEPOT :beat:

4ktvs
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Re: Questions about card usage and credit score, pretty please

Postby 4ktvs » Thu Dec 17, 2015 6:34 pm

Sweetclementine wrote:Hi all, we just finished a chapter 13 a year ago and are just not finally able to start rebuilding our credit by qualifying for cards. I tried the Amex blue cash card earlier this year and was declined, but happily a couple of days ago was approved.

I haven't had or used a credit card in many years. So... I have questions about usage and credit scores.

1. I ONLY got this credit card to improve my score and maybe start playing the rewards game. I was planning to max it out each month (it's only $1000 max for now) and then pay it off in full monthly. But I am reading that it is not ok for your credit score if you use more than 20% - 30% of the card limit at a time, EVEN if you pay the balance off every month. Is this true?

2. If no .1 is true above, then what about if I use 20-30% of credit limit weekly and then pay it off weekly... would that make a difference at all and still be good for my credit score?

3. Is it true that if you apply for several credit cards in a span of 24-48 hours, it will only ding your credit once?

Thank you so much, I really appreciate you guys helping a newbie out!


With only one $1000 limit card I would keep it under %50 usage. If you max it out every month even with PIF it will be harder for your scores to go up and Amex might feel uneasy about you using the full limit right off the bat.

After going though a BK the last thing I would do is apply for even more credit right off the bat. It doesn't look good and you are likely going to get a bunch of denials in the mail box if you do that right now.

I would use this card and pay it off in full every month for at lest a year so you can show some good history to other banks when applying for credit. Also to get back into credit slowly so you hopefully don't end up filing for bankruptcy again.

takeshi
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Re: Questions about card usage and credit score, pretty please

Postby takeshi » Fri Dec 18, 2015 10:25 am

Sweetclementine wrote:I ONLY got this credit card to improve my score and maybe start playing the rewards game. I was planning to max it out each month (it's only $1000 max for now) and then pay it off in full monthly. But I am reading that it is not ok for your credit score if you use more than 20% - 30% of the card limit at a time, EVEN if you pay the balance off every month. Is this true?

Usage and reported balance are two entirely different things that you'll want to understand. Credit cards typically report once a month. For most cards the report date is the statement date and that is the case with American Express. On statement date AmEx will report the current balance to the CRA's. If you wait for the statement and pay in full then your card will have a reported balance even though you paid in full. Payments after the report date will not change the balance that was already reported. You can, however pay prior to the report date to reduce the reported balance.

As for 30%, that's a suggested max as in "do not exceed". However, it is not ideal. Generally speaking, lower reported revolving utilization is better as long as you don't have all your revolving accounts reporting 0 balances. There is a hit for doing so.

You can use the card all you want up to its limit and reduce the reported utilization by paying down the balance prior to the report date. Make sure that you pay down the balance prior to statement date with sufficient time for the payment to clear and also considering any charges that might post in that timeframe. If you need to spend more than $1K total you can charge and pay multiple times as needed. Just be aware of what your balance will be on the report date and adjust it as needed.

If you choose to do that you'll probably want to have it report at 10% or less since you're already managing its reported utilization. You might as well have it report as low as possible for best scoring benefit.


You'll also want to understand the difference between statement balance and current balance. The balance on statement date becomes your statement balance for the cycle and is reported to the CRA's. You need to pay the statement balance in full by its due date to avoid carrying a balance, incurring debt and accruing interest. As you incur charges after the statement date you current balance will increase but that statement balance will not change as the cycle closed out on statement date. Those charges apply to the following statement cycle. You do not need to pay your current balance in full -- just the statement balance. There's no penalty in paying the current balance but it's not necessary.

Sweetclementine wrote:If no .1 is true above, then what about if I use 20-30% of credit limit weekly and then pay it off weekly... would that make a difference at all and still be good for my credit score?

Any scoring model generates a score based on the data in a report when the score is generated.

That's why it's your reported utilization that matters. Its the balance(s) and limit(s) as indicated on your report that will be considered by the scoring model. The scoring model cannot access current account information.

It really doesn't matter how often and how much you charge and pay. What matters is what is reported on report date.

Sweetclementine wrote:Is it true that if you apply for several credit cards in a span of 24-48 hours, it will only ding your credit once?

Not necessarily. A creditor may use one pull for multiple products but be careful relying on that. If you apply with different creditors then expect a pull from each creditor. I'd recommend assuming a pull for each product regardless of creditor unless you enjoy disappointment.


Google and read the 3x CLI for your new Blue Cash (which one?).

Vermonster
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Re: Questions about card usage and credit score, pretty please

Postby Vermonster » Fri Dec 18, 2015 11:32 am

Sweetclementine wrote:1. I ONLY got this credit card to improve my score and maybe start playing the rewards game. I was planning to max it out each month (it's only $1000 max for now) and then pay it off in full monthly. But I am reading that it is not ok for your credit score if you use more than 20% - 30% of the card limit at a time, EVEN if you pay the balance off every month. Is this true?

2. If no .1 is true above, then what about if I use 20-30% of credit limit weekly and then pay it off weekly... would that make a difference at all and still be good for my credit score?

3. Is it true that if you apply for several credit cards in a span of 24-48 hours, it will only ding your credit once?


1. I would not plan on maxing a card out for the sake of a credit score. That is a dangerous path to financial trouble. Use it as normal and pay all but a little bit off before the statement. Let a small balance report before paying the balance off completely. This can help a little bit.

3. Each app will count as a HP (unless combined as others have said). The only reason to go on an "app spree" is that you can generally get all applications in before your score takes a hit from the HPs and new accounts. People with scores on the fence do this because the 1-2 initial HPs might drop their scores enough to decline future apps.
Chase Freedom $9k~~Chase Sapphire Preferred $6.5k~~Amex Blue Cash Preferred $12.4k~~Citi Double Cash $4.7k

Sweetclementine
 
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Re: Questions about card usage and credit score, pretty please

Postby Sweetclementine » Mon Dec 21, 2015 1:04 pm

takeshi wrote:
Sweetclementine wrote:I ONLY got this credit card to improve my score and maybe start playing the rewards game. I was planning to max it out each month (it's only $1000 max for now) and then pay it off in full monthly. But I am reading that it is not ok for your credit score if you use more than 20% - 30% of the card limit at a time, EVEN if you pay the balance off every month. Is this true?

Usage and reported balance are two entirely different things that you'll want to understand. Credit cards typically report once a month. For most cards the report date is the statement date and that is the case with American Express. On statement date AmEx will report the current balance to the CRA's. If you wait for the statement and pay in full then your card will have a reported balance even though you paid in full. Payments after the report date will not change the balance that was already reported. You can, however pay prior to the report date to reduce the reported balance.

As for 30%, that's a suggested max as in "do not exceed". However, it is not ideal. Generally speaking, lower reported revolving utilization is better as long as you don't have all your revolving accounts reporting 0 balances. There is a hit for doing so.

You can use the card all you want up to its limit and reduce the reported utilization by paying down the balance prior to the report date. Make sure that you pay down the balance prior to statement date with sufficient time for the payment to clear and also considering any charges that might post in that timeframe. If you need to spend more than $1K total you can charge and pay multiple times as needed. Just be aware of what your balance will be on the report date and adjust it as needed.

If you choose to do that you'll probably want to have it report at 10% or less since you're already managing its reported utilization. You might as well have it report as low as possible for best scoring benefit.


You'll also want to understand the difference between statement balance and current balance. The balance on statement date becomes your statement balance for the cycle and is reported to the CRA's. You need to pay the statement balance in full by its due date to avoid carrying a balance, incurring debt and accruing interest. As you incur charges after the statement date you current balance will increase but that statement balance will not change as the cycle closed out on statement date. Those charges apply to the following statement cycle. You do not need to pay your current balance in full -- just the statement balance. There's no penalty in paying the current balance but it's not necessary.

Sweetclementine wrote:If no .1 is true above, then what about if I use 20-30% of credit limit weekly and then pay it off weekly... would that make a difference at all and still be good for my credit score?

Any scoring model generates a score based on the data in a report when the score is generated.

That's why it's your reported utilization that matters. Its the balance(s) and limit(s) as indicated on your report that will be considered by the scoring model. The scoring model cannot access current account information.

It really doesn't matter how often and how much you charge and pay. What matters is what is reported on report date.

Sweetclementine wrote:Is it true that if you apply for several credit cards in a span of 24-48 hours, it will only ding your credit once?

Not necessarily. A creditor may use one pull for multiple products but be careful relying on that. If you apply with different creditors then expect a pull from each creditor. I'd recommend assuming a pull for each product regardless of creditor unless you enjoy disappointment.


Google and read the 3x CLI for your new Blue Cash (which one?).


This was SO helpful. Thank you!



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