3 ms·

> as it's widely believed that the optimal % is more than zero (not "too low" but also not "too high", whatever that means). The optimal ratio is very close to

> as it's widely believed that the optimal % is more than zero (not "too low" but also not "too high", whatever that means). The optimal ratio is very close to 0[1]: +-----------------------+---------------------+ | Range | Average Utilization | +-----------------------+---------------------+ | 300-579 (Poor) | 82.1% | | 580-669 (Fair) | 56.1% | | 670-739 (Good) | 35.2% | | 740-799 (Very good) | 14.7% | | 800-850 (Exceptional) | 6.5% | +-----------------------+---------------------+ Basically the concept is that if you're already borrowing as much money as people are willing to lend you, those people probably have a good reason to not want to lend you more. Also, as a bonus, the utilization component doesn't have history. If you're about to take out a loan, you can just borrow/pay back as much debt as you want the previous month for an ideal utilization. [1]: https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/ https://www.experian.com/blogs/ask-experian/credit-education...

aidenn0 2y ago
Good resource, here's a bit about how you are likely to have a non-zero utilization even if paying your card off in full each month (linked from that article): > Now things get a little trickier. Paying your balances in full each month isn't the same as maintaining 0% utilization. Here's why. > Credit scoring systems calculate utilization using balance information that card issuers report monthly to the national credit bureaus (Experian, TransUnion and Equifax). Each issuer reports balance information on its own schedule, and many report to different bureaus on different days of the month. Each credit bureau also has its own timetable for revising your credit report once it has received a card issuer's update. > For these reasons, if you use your credit cards at all, your utilization can vary from day to day at any one credit bureau—and it will differ from one credit bureau to another, even though all of their records are accurate. > Here's a simple example: > Let's say you use a credit card with a $5,000 credit limit and zero balance to make a $500 purchase on the 10th of the month. You then pay that balance in full on the 20th, before the charge even appears on your statement. If the card issuer reports your balance information to Experian on the 15th, then credit scores based on Experian data will reflect 10% utilization for that card on that month. Meanwhile, another credit bureau that gets updated on, say, the 25th will reflect 0% utilization for that card. > Factor in multiple cards and balances, and you can see that your utilization on any given day is something of a moving target, and so are credit scores based on it. (The normal differences between credit scores based on data at different credit bureaus is one reason many lenders use more than one credit score when processing loan or credit applications.) > Put another way, the only way to be sure you have 0% utilization all the time is to refrain from using your credit cards at all...

aidenn0 2y ago

Good resource, here's a bit about how you are likely to have a non-zero utilization even if paying your card off in full each month (linked from that article): > Now things get a little trickier. Paying your balances in full each month isn't the same as maintaining 0% utilization. Here's why. > Credit scoring systems calculate utilization using balance information that card issuers report monthly to the national credit bureaus (Experian, TransUnion and Equifax). Each issuer reports balance information on its own schedule, and many report to different bureaus on different days of the month. Each credit bureau also has its own timetable for revising your credit report once it has received a card issuer's update. > For these reasons, if you use your credit cards at all, your utilization can vary from day to day at any one credit bureau—and it will differ from one credit bureau to another, even though all of their records are accurate. > Here's a simple example: > Let's say you use a credit card with a $5,000 credit limit and zero balance to make a $500 purchase on the 10th of the month. You then pay that balance in full on the 20th, before the charge even appears on your statement. If the card issuer reports your balance information to Experian on the 15th, then credit scores based on Experian data will reflect 10% utilization for that card on that month. Meanwhile, another credit bureau that gets updated on, say, the 25th will reflect 0% utilization for that card. > Factor in multiple cards and balances, and you can see that your utilization on any given day is something of a moving target, and so are credit scores based on it. (The normal differences between credit scores based on data at different credit bureaus is one reason many lenders use more than one credit score when processing loan or credit applications.) > Put another way, the only way to be sure you have 0% utilization all the time is to refrain from using your credit cards at all...