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I know from this answer that having 1% utilization is better than 0%, but what about -1%? Is this even possible?

Every time I make a charge with my credit card, I pull up my bank's app and pay it down to be exactly 1% utilization. This creates a pending payment in the Activity tab.

Sometimes my payment will "post" to the account before the pending transaction that I was paying for does. When this happens, instead of showing a positive balance (which would indicate that I owe money,) it shows a negative one. It would appear from past months that that this is the number that gets reported to the bureaus, so what if it's negative at the exact moment when they report it?

If it is possible to report a negative balance to the credit bureaus, and this causes my computed utilization to be under 0%, how would this affect my credit score?

I'm going to overpay by 10% before my closing date this month, just to see what happens. I'll post my experiences as an answer after I pull a new report and score from CreditKarma. I'm curious to hear about others' experiences too though.

Edit: As quid pointed out my inference that "having 1% utilization is better than 0%" is very misguided interpretation of the data. This question is focused on the if/how the bureaus would accept/report a negative utilization. The question about how it would affect the score is secondary.

  • Why on Earth would you do that instant payoff thing? (Unless it's just an experiment, of course.) Get a debit card. – jamesqf Apr 5 '16 at 17:40
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    @jamesqf : I get 1% cashback on everything with it. At this point, it's mostly an experiment; I only even have this card to "build my credit", but because of the 1%-3% cashback, I find myself using it anywhere I can, then immediately paying it off. – Eric Seastrand Apr 5 '16 at 17:48
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    But my question is why you immediately pay it off, instead of leaving your money in an interest-bearing account until the due date? Not to mention causing yourself the extra work of logging into your account and making those multiple payments. And you do know that there are debit cards that give cash back? – jamesqf Apr 6 '16 at 4:23
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    I had been car shopping and didn't know when I might need a loan, so I was keeping my utilization low to keep my score high. I was not entirely sure when they would report my balance, so I always tried to keep it right at 1%. I finally bought that car, so now I'm basically just experimenting. I appreciate your suggestions (interest and cashback debit). I'm going to look into both. :) – Eric Seastrand Apr 6 '16 at 13:04
  • What's the point of immediately paying every bill? One of the main reasons I use a credit card is convenience: I don't have to worry about how much cash I have in my pocket, and I pay one big bill each month rather than a bunch of small bills. (Well, really two or three, because I have several credit cards.) If you're going to go to the credit card web site every time you use the card to immediately pay it off, wouldn't it be easier to just pay cash, or use a debit card? Seems like you're going out of your way to make it inconvenient. – Jay Aug 1 '16 at 17:18
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It will be considered 'unused credit'. I have tried it yeas ago. They just report zero usage.

  • Also in my experience it will be very temporary. After a few months they'll mail you a check for the balance. – stannius Apr 5 '16 at 22:37
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I am interested in seeing what happens to your report after you test this, but I don't think it's possible in practice, would not affect your credit score, and also wouldn't be worth it for you to carry a negative balance like that.

1. Why I don't think it'll happen:

Having a -1% credit utilization essentially means that you are lending the credit card company money, which isn't really something that the credit card companies "do". They would likely not accept an agreement where you are providing the credit to them. Having credit is a more formal agreement than just 'I paid you too much this month'.

2. Why it wouldn't affect your score:

Even if your payment does post before the transaction and it says you have a negative balance and gets reported to the credit bureau like that, this would probably get flagged for human review, and a negative credit utilization doesn't really reflect what is happening. Credit utilization is 'how much do you owe / amount of credit available to you', and it's not really correct to say that you owe negative dollars.

3. Why I don't think it's in your best interest:

Carrying a negative balance like that is money that could be invested elsewhere. My guess is that the credit card company is not paying you the APR of your card on the amount they owe you (if they are please provide the name of your card!). They probably don't pay you anything for that negative balance and it's money that's better used elsewhere. Even if it does benefit your credit score you're losing out on any interest (each month!) you could have earned with that money to get maybe 1-2% better rate on your next home or car loan (when will that be?).


TLDR: I think credit utilization approaches a limit at 0% because it's based on the amount you owe and you don't really owe negative dollars.

I am very interested in seeing the results of this experiment, please update us when you find out!

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    If my negative balance grew away from zero at the rate of credit cards, I know where I'd be putting my money :-) – corsiKa Apr 5 '16 at 17:33
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Your credit card company will send you funds, probably a paper check, if you have a negative balance. So this situation will not last long. I'd guess 3-6 months at most, depending on the company's procedures.

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The conclusion that "it's bad to have 0% utilization" from the data you linked is misleading. When people have zero history, they also have zero utilization. The fact that generally people with zero utilization are credit virgins is what drives that average score. Obviously, people with zero, or limited, history will have significantly lower credit scores than folks with some utilization and a lot of history.

In response to the couple comments regarding the dip on attaining 0% utilization. The data shows a 67 point drop in average score from 0% to 1%-10%. The stark deviation in average score between those two groups is not the result of a couple point change because of zero utilization.

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    I can't believe I never thought about this, but it makes perfect sense. Of course most people with zero utilization have low scores; most probably have no credit history. It sounds like you are saying that having zero percent utilization may not actually impact my score negatively, since the length of history would be the same. I think you should really elaborate on this point (in a separate answer, to the SO question that I referenced,) as there seems to be a lot of misconception about 1% being better than 0%. – Eric Seastrand Apr 5 '16 at 17:42
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    I haven't checked on the real FICO scores but the fake scores do show a hit to your credit rating for 0% utilization. I've seen dips due to this--my total available credit is high enough that in a month where I don't charge much the utilization can dip low enough that it gets listed at 0% (in reality, under 1%). – Loren Pechtel Apr 5 '16 at 20:07
  • I made a payment in full the day the statement was cut, and the zero usage dropped my score a bit. It bounced right up the next cycle, but it's not like the zero that month would have affected a decades long history of credit. – JoeTaxpayer Apr 5 '16 at 20:08
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My experiment has concluded, with the same exact result that Aganju told me to expect.

Just pulled Equifax report on CreditKarma, and confirmed that my bank reported the balance as $0. I expect that TransUnion will be the same; I'll update if it's different (evidently TU is still behind on the updates from my bank; I'll check again next week.)

Regarding my score: I went from 1.333% card utilization to 0%, but my "VantageScore 3.0" did not change at all; not even by one point.

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For me, it is mostly an experiment. In any case, I has a perfect score 2 month ago, and in 2 cycles of 0% utilization, the Transunion score has plummeted to 822, a whopping drop of 28 points. This maybe a deficiency is the scoring model but the credit activity with no credit balance at the end of the billing cycle has the same effect as no credit usage. Not a good thing. So my advice - don't pay the entire sum, rather pay enough to leave 1% credit utilization.

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