- Centurion Member
- Posts: 4913
- Joined: Sun May 20, 2012 4:35 pm
- Location: WI
I was reading on the FICO forums and one poster said "I have 65k in available credit to me". And I got to thinking about that, I mean really thinking about it and what it means.
Of course over there they are absolutely fanatics that utilization must be EXACTLY 4% (3.9% doesn't show devotion to the cards, and 4.1% is a HUGE red flag to lenders....humor, sort of). But, in all seriousness, there IS a point that actually is a red flag and probably trouble. So say you have a card with a 10k limit for the sake of argument. And say you use it during the month to pay all your bills, and end up with 5k reporting. You pay it in full before the due date, but to hear them tell it, you are now a credit terrorist because you have 50% utilization. And honestly, that WILL lower your score a bit. But, and there is a but, but you had the money in the bank and you paid it off so what is the big deal?
I'd say in general, there isn't one. As long as you can and do pay it off, and aren't out to game your score (which makes you so NOT like the rest of us), and aren't going for a car or new credit or mortgage, it's NOT a big deal. But if you are doing any of those things, then it's smart to make sure that only a small amount hits your report for the best score and thus the best terms.
Also some lenders may be like the FICO folks and freak out if they see that and take AA on you as well. But honestly if they freaked over THAT, my feeling is, don't need em anyway, but you may feel different.
So, roundabout way to get to the point, lenders may give you a limit, but they sure don't actually want you USING that limit as that will freak them out. But they do want you using the card. But only 4% of the card can report each month or they freak out. So even if you have a 10k limit card, you had best only allow 400 dollars to hit it when it reports. That means effectively if you really think about it, your "practical" limit is 400 bucks, unless you like paying early AND they don't do a mid-cycle report like Discover of fond of doing and so on. And if you have a Cap One rebuilder card with a 300 limit, well ideally then that gives you 12 bucks. Don't spend it all in one place!
In short, the rules of the credit game are nuts, and will drive you nuts if you waste too much time and energy thinking about them, kinda like I just did.....
But the bottom line - just keep this stuff in mind. I'm not a fanatic like the FICO guys - I'm a different sort of fanatic - I pay in full as soon as the charges hit so I never see this become a problem. I rotate cards so I can let only one report a balance most of the time. But you know, you could go on and on about that and gaming that whole thing too and anyone who read this probably already died of boredom so enough for tonight!