I could use some advice, mainly on managing credit utilization ratio while I use my new rewards card. It looks like this forum is the right place.
So, last night I just registered for my first ever rewards credit card (The Barclaycard Arrival World Mastercard). My goal is to really use it as much as possible to accumulate mileage.
However, I'm worried about credit utilization ratio really hurting my score in the future.
Right now my FICO score is about 770. I have a mortgage and a car loan. My credit history is fairly young - 7 years. No late payments on anything.
My three credit cards are:
1. Bank of America Visa - $1500 limit (my first and oldest card)
2. Capital One Mastercard - $1000 limit (I never use this)
3. Barclaycard Arrival World Mastercard - $3800 (just registered yesterday)
So my total available credit is only $6300. If I go charging up a storm every month on the Barclaycard, will this really hurt me? Should I try for another credit card to boost my available credit?
There's also something else I don't understand. When you use a rewards credit card, do you get points at the moment you make the purchase, or do you have to wait for the purchase to show up in the monthly statement? I ask because the way I currently use my credit card is to proactively pay it off as soon as possible. I rarely wait for the charges to show on a bill.
Is paying off charges before the closing date a way to drop credit utilization ratio?
haikuginger wrote:It's important to note that credit utilization over time doesn't affect your score now. So, it doesn't matter if you consistently use 99% of your available credit as long as you start paying before the statement a couple months before you apply for new credit, giving enough time for the lower usages you get that way to report.
Volcanon wrote:This is helpful! - If I understand it right.... so the credit utilization ratio is like a "snapshot" of your current debt to credit ratio? It's not some sort of average tracked over time? So if you want to apply for a new loan/CC, you just need to make sure it is good before applying?
Volcanon wrote:There's also something else I don't understand. When you use a rewards credit card, do you get points at the moment you make the purchase, or do you have to wait for the purchase to show up in the monthly statement
haikuginger wrote:If you're not planning on adding more credit, there's absolutely no permanent harm in having large balances report.
Nachos Libres wrote:How much do you consider "charging up a storm"? I applied and received the Barclaycard Arrival last August and was only approved for $5,000. Once I received the card I called and told them that wasn't going to be sufficient because I would hit that limit in 2 weeks and they bumped up my credit limit to $15,000 over the phone. I asked for another limit increase of $10,000 a month or so ago but was only given $5,000 because of my high utilization of the card (I would pay the full balance immediately after the statement hit).
I now instead just keep the balance at 10% so anytime my balance goes over $2,000 I just pay the full amount - which means I have to make several payments a month. It is a little of a hassle but keeps the credit utilization low while allowing to earn full rewards. Also, with the Arrival you get credit once the charge clears - so paying the balance early doesn't affect the rewards.
If you are going to be hitting the limit within a month then you definitely should ask for a credit limit increase - and at the minimum just make multiple payments. Thankfully Barclaycard doesn't set a limit on how many payments you can make online.
Volcanon wrote:I'm intrigued that you can just call and push the limit. What do you say when you call? Just that I will be hitting the limit and need more? I will try this when the card gets here. Do you think this will result in another hard pull?