Thread: When To Pay Bill For Best Credit Utilization Ratio?

I have been reading, or interpreting what I read, about the credit utilization ratio and keep hearing conflicting arguments. I just recently found out about the 30% utilization ratio that you should strive for. I understand that but, I'm confused about when to pay my bill because I've also heard that paying in full (taking your balance to $0) means that credit card companies send a credit utilization ratio of 0% to reporting bureaus.

Here is my situation:

My credit card billing cycle starts/ends on the 22nd. My payment is due the following 17th. So right now I am in a billing cycle that lasts from 11/23/11-12/22/11 with my payment due on 01/17/12. As of the end of the day on the 22nd, my outstanding balance at that time is the balance that is on my statement. This is the balance sent to credit agencies, correct?

If this is the balance used for the credit utilization ratio, my last 5 statements had ratios of 45,45,38,58, and 27%. This balance on my statement, is also the amount that I completely pay before the following 17th, as opposed to only paying the $15 minimum.

Is this balance, the one reported on my statement and sent to the bureaus, the only one that matters? Meaning, I could pay down some of my balance to get below 30% before my cycle ends, or should I never take my balance above 30% even if it's in the middle of the billing cycle. I hope this makes sense. Thank you for reading, and I really am thankful for any help you can provide.

Cliff

Originally Posted by clifford_92FS

I have been reading, or interpreting what I read, about the credit utilization ratio and keep hearing conflicting arguments. I just recently found out about the 30% utilization ratio that you should strive for. I understand that but, I'm confused about when to pay my bill because I've also heard that paying in full (taking your balance to $0) means that credit card companies send a credit utilization ratio of 0% to reporting bureaus.

Whoever said that is wrong. Your utilization is not reported. What is reported is your available credit (limit) and you balance on a particular day. The reporting day has nothing to do with your closing date, due date, or anything else. It will be some random day during the month and it might change. As long as you pay in full by the end of the month you will be in good shape.

Originally Posted by clifford_92FS

Here is my situation:

My credit card billing cycle starts/ends on the 22nd. My payment is due the following 17th. So right now I am in a billing cycle that lasts from 11/23/11-12/22/11 with my payment due on 01/17/12. As of the end of the day on the 22nd, my outstanding balance at that time is the balance that is on my statement. This is the balance sent to credit agencies, correct?

If this is the balance used for the credit utilization ratio, my last 5 statements had ratios of 45,45,38,58, and 27%. This balance on my statement, is also the amount that I completely pay before the following 17th, as opposed to only paying the $15 minimum.

Is this balance, the one reported on my statement and sent to the bureaus, the only one that matters? Meaning, I could pay down some of my balance to get below 30% before my cycle ends, or should I never take my balance above 30% even if it's in the middle of the billing cycle. I hope this makes sense. Thank you for reading, and I really am thankful for any help you can provide.

Cliff

Generally speaking you should never take your balance above 30% of what is available. However, utilization is not a very "durable" factor. If you go to 90% one month then pay everything off you will be back to good credit within a month or two.

The bottom line is, if you keep your usage below 30% and pay responsibly for 6 months or so you limit will likely be raised so that you can spend more and still stay under the 30% limit. Just be patient.

Thank you for your response. If I understand you correctly, credit utilization is only taken into consideration at one point in time. For example, it is not based on my average utilization over a certain time period, rather it is based on when the credit scoring agency looks at my utilization? So as long as my debt to credit limit ratio is low at that point, that percentage will be used to calculate my credit score or creditworthiness?

Again, sorry for all questions and no productive help on other threads. I am just beginning to understand all the different aspects of credit.

The balance shown on my credit reports is generally NOT the statement balance. It might be for you but that could be just a coincidence.

You utilization is also not calculate over time or on the date your credit card balance is reported. It is calculated on the date your credit report is pulled. For example,

Limit $1000

Card issuer reports on the 6th of every month

Balance reported on Nov 6 = $250
Statement issued on Nov 10 with balance of $350
Due date Nov 15, full balance paid off on Nov 12

Your utilization will likely show as $250/$1000 =25% until the new $100 balance is reported on Dec 6th, assuming you make no new purchases after

Does that make sense?

It's a kind of rolling thing. Some issuers report on the statement date, some do not. Some report the same day every month, some vary. Some will report on request if you pay off your card, etc. There are some general rules but every issuer is a little different.

Mine are all statement balances too.

To muddy things up here a bit...

Cards that don't report credit limits (Visa Sig/World MC) but high balances instead, still manage to report actual high balances, not statement balances.