I have a CC with $6k limit. I normally spend between $0 and $1k on it and pay the balance in full every month. This month I have $4k on it.

If I wait until I get a statement to pay it off, will the credit bureaus say my percentage of credit uses it too high and lower my score by a few points?

I know normally it wouldn't really matter, but I'm looking to buy a house in the next two months so micromanaging my credit score is worth it.

  • why only half the balance, why not all of the balance? – mhoran_psprep Sep 16 '14 at 21:29
  • @mhoran_psprep good question. I assumed the "optimal" utilization was greater than 0% but less than 66%. – Philip Sep 16 '14 at 21:43

Utilization is near real-time. What that means is that what is reported is what is taken in terms of debt-to-income (DTI) ratios. When a mortgage broker pulls your credit, they will pull the latest balances with the minimum payments. This is what is taken to determine DTI along with your gross monthly income. If you do not pay your account in full before the statement date, then you more than likely will have to wait an additional statement cycle before it reports to the credit bureaus. Therefore, your utilization is dynamic and the history of your utilization month-to-month is not recorded forever. Only the current balance. What is maintained and reported is your payment history. So you want to never be late if you want to be approved anytime soon for a mortgage.

A lower DTI will not help your interest rate. As long as you stay away from the maximum DTI for the mortgage vehicle you are attempting to be approved for (VA, FHA, Conventional, etc), then your DTI should not be a concern. If you are borderline at the time of underwriting, you can take the opportunity and pay off the balances. The mortgage company can then do what is called a credit supplement which entails contacting those lenders where you have proven you have a zero balance and manually input the zero balance cards, that have not yet reported to the bureaus, in your final application to the mortgage company for underwriting approval.

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This can make a difference of a few points. When your balance is reported on a monthly basis to the bureaus that current balance is used to determine your utilization. Keeping it paid down will help in this case. If you are monitoring your credit regularly, you can see what time of the month your balance is reported and pay before then (just make sure you include enough padding to be sure your payment clears before the reporting date--normally only a business day or so, but weekends can throw it all off).

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From what I have heard on Clark Howard if you pay your balance off before the statement's closing date it will help your utilization score. He has had callers confirm this but I don't have first hand knowledge for this to be true.

Also this will take two months to make the difference. So it will be boarder line if you will get the benefit in time. Sign up for credit karma if you like. You can get suggestions on how to help your score.

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    As I've said elsewhere: I have trouble believing that the utilization score, per se, makes as much difference as folks claim. It may affect the score a bit, but remember that the score is only an initial screening step. – keshlam Sep 17 '14 at 1:50
  • I can say from first hand experience that I have a 6k balance every month that I pay off in full. (Yeah I spend a lot of money). I decided to get a third and fourth credit card so that my utilization went from 39% to 12%. My score went from 742-768 on credit karma. My fico is also up according to discover from 766-785. It took 60 days to see any meaningful increase. – Mark Monforti Sep 17 '14 at 13:13
  • Note that those numbers were already high enough that this small change probably makes no real-world difference. Optimizing is fine, but put the effort into optimizing the things which actually make your life better. – keshlam Sep 17 '14 at 21:30

It will reduce the credit ding you will take but why does it matter? Next cycle when it's paid off your credit score will go back to where it was. Unless you're looking for a loan right now and your credit is marginal why worry about it?

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  • As I mentioned in the question, I may be applying for a mortgage at any time. – Philip Sep 16 '14 at 19:11
  • @Philip Two months is not right now. It comes back the next cycle. – Loren Pechtel Sep 16 '14 at 19:14
  • I meant sometime within the next two months. Thanks for the info though. – Philip Sep 16 '14 at 19:45

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