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Since my bank started offering free monitoring of my credit score, I've become aware of its minor ups and downs for the first time, and I've noticed a puzzling pattern.

So far as I understand, low credit utilization is generally considered a good thing. My utilization is in a low but reasonable bracket, typically bouncing around between 5%-10%. My cards are long-established, paid off each month, and used frequently (the low utilization is due to the companies choosing to raise the limit, not me avoiding credit spending), and my overall score is good.

Rather than going up when my utilization goes down as I would expect, however, it appears that there is a very clear pattern of my credit score going up when my utilization goes up! The credit score report sites even give me a recommended action to reduce my utilization in order to further improve my score. The actual numbers, however, are showing me the opposite.

Why would this be?

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  • Which credit score are you talking about? And where are you finding it? Typically you can get a credit report from each credit bureau for free each year, but your credit score generally requires paying a fee. There are some sites online that provide "credit score" updates, but those are calculated by the sites themselves and could vary depending on where you look it up.
    – Daniel
    Aug 15 at 13:05
  • @Daniel: A good number of credit card web sites allow you to see the credit score any time you want. No idea how it's calculated, though.
    – jamesqf
    Aug 15 at 16:19
  • I would see it from the perspective of a bank: Who would you appreciate and value more in terms of credit score and loans? Person 'A ' that utilized 10 credit utilizations worth X-amount over a certain perdiod with perfect payback or person 'B' that utilized 30 credit utilizations worth two times X-amount over the same period and the same perfect payback moral?
    – iLuvLogix
    Aug 15 at 17:01
  • @Daniel It's my TransUnion score, which my bank provides access to as part of their customer benefits.
    – jakebeal
    Aug 15 at 18:37
  • @iLuvLogix What you're saying certainly sounds plausible, but I'm wondering if anybody actually knows if that's the explanation, since it seems to go against what's written in so many places, including by the TranUnion itself: "Of course, getting at or close to $0 is best"
    – jakebeal
    Aug 15 at 18:42
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Not simple to answer such a ‘why’ question. I trust that while the algorithm appears to be secret, it was created based on reviewing billions of data points over time. The goal is for a lender to be able to objectively measure credit risk for a given customer. As a lender, I’d prefer to see a customer with a history of borrowing and paying back money.

Funny story - I determined my card issuer reported my balance on the last day of the month. The card statement cut on the 15th. So, it’s in my power to have the balance close to zero or sometime rather high. This past December, I had a combination of insurance, and charity donations that I submitted through my card. My utilization went to 50% as of month end. My credit score dropped 70 points. It was 840 on one reporting service and dropped to 770. Jan 30, I was sure to pay in full, less than 1% utilization, and the score recovered.

I’d recommend you sign up for a free Credit Karma or Credit Sesame acct. Either will give you a simulated score, but will also help you see when your balance is reported.

Sorry the answer is a bit vague, but again, the scoring is a bit secretive.

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