Many people are distressed to learn that even though they pay off their credit card balances in full each month, they’re still getting dinged on the amounts-owed portion of their score. This is because exceeding a 30% credit utilization ratio at any point in a billing cycle on any one of your cards could do damage.
But there are tactics you can use get around this problem; in other words, you can win the credit utilization game. Here’s how.
Credit utilization is the ratio of your credit card balances to credit limits. For example, if your balance is $900 and your credit limit is $1,000, then your credit utilization for that credit card is 90%.
If it’s tough for you to avoid utilizing more than 30% of your available credit before the month is up, another solution might be to request a credit line increase on your card(s). For example, if your credit limit is currently $5,000, but you usually charge $2,500 to your card every month, you’re regularly hitting a 50% credit utilization ratio.
But if you raise your credit limit to $10,000, you can spend the same amount every month and only get as high as a 25% balance-to-limit ratio. This could make a big difference in your credit score in the long run.
Be aware that requesting a credit line increase from your issuer might initiate a hard inquiry to your credit report. This might cost you a few points on your credit score in the short-term, but as long as you’re practicing good credit habits, it should bounce back quickly.
In general, most credit card issuers report your balance and payment activity to the credit bureaus once per month. However, this doesn’t necessarily coincide nicely with when your bill is due. If your issuer reports a few days before the end of your billing cycle, you’ll consistently look like you’re carrying a high balance – even if you’re going to pay it off in just a few days!
But this can be solved by placing a quick call to your card issuer’s customer service line and asking when they report to the credit bureaus. Simply pay off as much of your balance as you can in advance of that date every month and you might see a jump in your score.
Nerd note: I called my credit card issuer’s customer service line to test out this trick and found that they report to the credit bureaus on the last business day of each month. Since my bill is usually due on the 10th, I’m sure my credit utilization looks pretty high every time the credit bureaus collect information about me. I’ll be paying as much of my bill as possible before the last business day of the month from now on.
Purchase eBooks for more detailed information:
10 Ways To Make A Million Dollars: https://www.amazon.com/dp/B072JVNHWS
Business Credit & Big Loans in 60 Days: https://www.amazon.com/Business-Credit-Big-Loans-Days-ebook/dp/B0727LF6QW/ref=sr_1_8?s=books&ie=UTF8&qid=1496506933&sr=1-8