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Question By
ask4kfox

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How come my credit card utilization is showing as poor when I pay off my credit cards each month?

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Helpful to 44 out of 49 people

If you pay after the balance is reported, your report will show a balance.  To remedy this you can pay online prior to the report date.  Your balance is only reported once a month, so your credit report will reflect whatever the balance is at the time it's reported.  

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Helpful to 8 out of 9 people

How do I know when my credit card company reports balances? I guess when it's due?

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Reply by
takeshi74

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I can't seem to reply to newcreditcarduser so I have to reply to mnc2597.

You can always call and ask your creditors when they report.  You can also look at your reports.  The last report date is probably the normal report date unless there was a midcycle update for some reason.

The due date is not the report date.  That's why ask4kfox has high utilization even though cards are paid in full.  He/she is paying by the due date but that falls after the report date so the payment will not reduce the reported balance.

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Utilization

Helpful to 9 out of 11 people

My understanding is that you need to use less than 9% of your availabile balance have excellent utilization.  So it has nothing to do with paying off each month.  If you only have $5K in credit and charge $4k monthly you will have poor utilization even if you are responsible and pay it off monthly.   You can either get increases in your credit, stop charging as much or pay off part of the balance before the credit card closing period.   I personally don't think this metric makes any sense.  Being responsible with a couple of credit cards should give you a higher score than someone that has 20+ credit cards. 

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Reply by
takeshi74

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Helpful to 2 out of 3 people

It makes sense because utilization is a risk factor.  Those that go into debt are a risk.  One does not have to limit spend or use.  One can pay down the balance prior to report date as you yourself indicated.

Reply by
spacemule

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Helpful to 19 out of 20 people

There is SO much misinformation in the replies here it's ridiculous.  It's VERY simple.  Poor utilization means your credit report is showing too high a percentage of balance in proportion to available limit.  If you pay your bill after the month reporting date for your card company, your utilization will be higher than it will be if you pay before the reporting datre. 

For example.  Let's say Bob has a credit limit of 1,000.  Bob charges 600 on the 10th.  His card statement cuts on the 15th day of the month, reports balances to the credit bureaus, and gives him a due date a few weeks out.  Bob waits to make a payment until he is billed.  Bob pays the 600 in full.  So, he is not carrying a balance, but since the report has already been submitted for the month, the credit bureaus do not reflect this, and will report his utilization as 60%  (600 / 1000)

Now, let's alter that paybment just a little.  Bob charges 600 on the 10th.  The 600 posts to his account on the 12th, and Bob pays in full on the 13th.  The statement cuts on the 15th, and reports to the credit bureaus a 0% utilization ratio, since there is no balance *when the report is sent*.  Bob is not carrying a balabce, just like he didn't in the first scenario, but he is now reaping the credit scoring beneifits by showing a zero balance and a large payment on the credit reports.. 

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Helpful to 14 out of 21 people

You may be paying the cards in full before the balance is reported on the CC statement or to the credit bureau. This will appear as if you are not using the cards. Good credit results from showing that you can use the credit and pay it off responsibly. If your credit report is not receiving the new balances because you pay them off too quickly, you can remedy this by making the purchase at the beginning of the statement start date and waiting until 2 or 3 days before the due date to pay them off rather than paying the bill as soon as it appears on the account.

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Reply by
takeshi74

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This is incorrect.  The problem is that the OP is not paying prior to report so the OP has high utilization.  If the OP was paying prior to report date then the OP would not have poor/high utilization.  

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utilization meaning...

Helpful to 17 out of 27 people

Well it could be as simple as the words you yourself used. poor utilization. if you arent using it "enough" which is not something I can tell you specifics on, that could have unfavorable consequences but I would guess it has to do with the percentage of your credit you are actually using. 

credit Karma says this:

Your credit card utilization is the percentage of your credit limits that you're using. It's calculated by dividing your credit card balances by your credit limits. Generally, the higher your utilization (the more credit card debt you have), the lower your credit score.

Reply by
rgar102181

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Helpful to 8 out of 13 people

Credit Karma is showing my utilazation as 3%, but I use about 25% of my VISA every month. I pay the card off once or twice a month. My credit score is 741, but I do not have any marks on my credit history. I think my score should be 850. These credit scores do not make any sense to me, and my credit history is only 7.5 years and it does not show accounts that were paid in full.

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Reply by
takeshi74

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Helpful to 0 out of 1 people

No, poor utilziation is high utilization.  Lower utilization is better.

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Helpful to 3 out of 4 people

Im learning about this, its all new to me..so i see never use more than 9% of your credit limit each month is whats gonna be very best..so if you have a $1,000.00  limit, then never spend more than $90.00 a month on it, and pay it all off for 100% utlization score

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Reply by
takeshi74

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Helpful to 1 out of 3 people

You can use whatever you want.  Just be careful about what is reported.

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Helpful to 1 out of 1 people

FYI the amount that is reported to the credit agencies is the account balance as of the closing of the monthly statement. i like to get my payments cleared before statement closing, that way they show payment history with 0% utilization. this is good. 

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988 Contributions
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Helpful to 2 out of 4 people

Don't rely on simulators.

If your revolving utilization is poor then it is high.  If it is high and you are paying your balances in full then the problem is that you're paying after the account reports so your payment does not reduce the reported balance.  if you want to reduce the reported balance then you need to pay before the report date.  Most credit cards report on statement date so for such cards you'd need to pay down/off the balance prior to the statement date.  Verify when each of your accounts reports.  There are some creditors like US Bank who do not report on statement date.

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in contrast, even if you pay ON TIME, if you pay your CC off after the closing of the monthly statement, that balance will be reported. it's possible to pay your CC in full every month and POOR utilization, meaning a high balance is reporting relative to high credit. hell it could be show maxed out even if you paid it in full if you're not careful when your payments are submitted! 

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No one is answering the question

Helpful to 2 out of 6 people

I had the same thing happen to me with the credit score simulator. My score dropped 50 points when I selected that option. I wonder why!

Reply by
giglia

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Helpful to 5 out of 7 people

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