1
  • I have 3 credit cards with a total credit limit of $5,100.
  • I pay my credits every week on Monday.
  • I spend more than my credit limit every month BUT I never spend more than 50% of my credit limit every week.

Is that a bad practice? Should I only spend less than 30% of my credit limit every months even if I pay my credit cards pretty often?

I thought it was a bad practice but I noticed that my credit score is getting bad even if I always pay on time.

Thanks

  • How much has your score changed by, and prior to this when you had the higher score, what was your average usage on the CCs? – TTT May 16 '16 at 18:22
4

From my experience, banks report your credit usage only once a month, and they report the total on your bill. Whatever else you do during the month does not matter.

I checked this by looking (monthly) at the full credit reports from all three big companies, for several years; each month shows exactly the total from the bill of that month.

As a consequence, when you pay off your credit card before the billing cycle ends, they'll report zero which implies you're not using your credit, so your credit score will get worse.

I recommend to go to a free credit report site (for example, www.annualcreditreport.com), pull your report, and read all pages in detail. The first time you see it, it might take you some minutes to understand all the details but it's very instructive.

  • I'd be willing to bet that the credit score is not "worse" due to the balance being reported as 0. – TTT May 16 '16 at 18:21
  • It has a minor impact if everything else is perfect. You need to use your credit, so all zeros is not good. But yes the impact is very minor, maybe brings an 820 to 815. – Aganju May 16 '16 at 18:58
  • yeah, that's what I was thinking. I suspect something else is going on here. – TTT May 16 '16 at 19:06
3

You can find many other questions on this site about timing your payments vis-a-vis your credit score (e.g., here, here, and here). Basically, your credit usage is reported at a particular time unknown to you. If you routinely have a lot of credit used up (as for instance spending 50% of your limit every week), you increase the odds that that high usage will be reported.

The exact manner in which your credit utilization affects your credit score is not public information. However, as you can see on some of those other answers, it doesn't seem that using 50% of your available credit should be so terrible for your score. Thus, if your score is bad, there may be other reasons. You might want to check out a site like CreditKarma to see what they think is impacting your score.

More generally, it's somewhat worrisome that you're spending more than your credit limit every month. That suggests that if some emergency arose you might not be able to handle all the relevant expenses. (Unless, that is, you have plenty of money and are just using the credit for rewards and/or convenience; but in that case it should be relatively easy for you to cut down your credit usage, or get your limits increased.)

  • I always thought the utilization was based on the statement balance. Are you suggesting balances are reported at other times during the month? – JoeTaxpayer May 15 '16 at 21:36
  • @JoeTaxpayer: That is what is suggested in the other questions I linked to, yes. – BrenBarn May 15 '16 at 21:38

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .