- Centurion Member
- Posts: 119
- Joined: Tue Sep 18, 2012 6:18 pm
- Location: US
So, If in Month 0, you have charged 100 units of your limit of 1000. On your end of month 0 statement it will show the bureaus that it is a new account, and you have a 10% credit utilization on this card (remember that they look at aggregate figures as well). Upon Paying your minimum payment of 15 on your due date, which is due during calendar month 1, nothing new is reported yet to your bureau. On your End of Month 1 statement, you have 85 units of pre existing charges, 2 units in interest, and another 100 units of new charges. Your new card utilization is 18.7% as viewed by the bureau. Upon paying your balance in full on your Month 1 statement due date, which is during month 2, your new balance is 0 and nothing new is reported to the bureau. On your Month 2 statement only the new 100 units of new charges which is viewed as a 10% credit utilization. In short, what the bureaus see, is the same set of numbers you see on your end of month statement. If it shows you have 1900/2000 charged, you have a 95% utilization and that is all they see. When you have 400/2000 next month, they don't know if you spent 400 new after paying off in full or if you paid 1500 and change and the 400 is the result of interest charges.
So, in theory, if you were to pay off your balance before the due date, it will show 0% credit utilization, which, if all cards have 0%, is scored poorly by most scoring algorithms. In addition to this, you will have given up the 20 day grace period which in the absence of rewards, is one of few reasons to use a card.