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I'm confused on how and when credit card utilization is calculated for one's credit score. Is the credit card utilization percentage calculated based on the maximum balance you had in a given month? Or the balance at the end of the month? Or some other metric? Here's an example to illustrate my question:

Say you have a credit card with a limit of $2,000. Every month you have a bill for $200 that you charge to this card. But you pay it off within hours or minutes of it being charged. So for the majority of the time, and at the end of the month, you have a balance of $0.

Will your utilization percentage be 10%, because the maximum you had at one point was $200 / $2,000 = 10%? Or would it be 0% if your score is calculated after you have paid it off? Is there a certain time (e.g. the last day of the month) that your balance is checked, and your utilization percentage is calculated?

  • Statistically speaking, those that have a low utilization percentage such as 7% have better credit score than those with 0% utilization. The reasoning is that some usage is better than no usage when it comes to your credit score. – Sun Jan 22 '15 at 17:09
  • Why would you pay it off within hours, instead of waiting until the payment is due and earning interest on the money in the interval? – jamesqf Jan 22 '15 at 19:32
  • This question may be of interest. – dg99 Jan 22 '15 at 23:22
  • @jamesqf What do you mean? I don't earn interest on money I spend with my credit card. – Eric Alberson Jan 23 '15 at 13:06
  • jamesqf was pointing out that the benefit of using a credit card is that you can wait until the due date to pay off the balance, thereby leaving money in your bank account (or other investment) as long as possible, where it can earn investment returns (such as interest). – dg99 Jan 23 '15 at 16:10
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If you look at a credit report, it will contain lists of balances from various credit cards. Each of them chooses when to report and how frequently; most commonly it is the statement balance (ie, the balance that showed up on your statement), but different credit card companies may follow different practices - call your lender(s) to verify, or pull a free credit report in the middle of the month and compare those balances to your statement balances.

Do not assume that if you pay in full the balance due it will be zero - it will only be zero if 1) they only report statement balances and 2) you pay in full before the statement is generated. (Although, if you're only using 10% of your credit, I wouldn't worry about it.)

Some links I've read that explain it in more detail; most seem to assume it's always statement balance, but as the first forum discussion shows, it is not always that date, just usually.

  • A discussion on the MyFICO forums showing various dates from different CC lenders.

An article from Savvy on Credit that explains how you can have a balance while paying in full every month

Experian explains how it works as well.

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    And the credit utilization would be computed from the total used (as reported) balances divided by the total credit limits (as reported). And thus a closed account with a balance would show as balance N and limit N (and thus 100% of that portion of your credit). – ChuckCottrill Jan 22 '15 at 23:44
  • The 10% was just an example so I could understand how it works. Great answer, this makes a lot of sense. Good articles too. Thank you. – Eric Alberson Jan 23 '15 at 13:17

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