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I opened a credit card account about two months ago, hoping to start building credit. Fortunately, I was approved for a regular credit card, not a secured one. I was informed by the person at the bank that the card is 0% APR for the first twelve months, and that if I wish to make any big purchases, I should do so now. I thought I about purchasing a laptop, but my credit line is insufficient for such a big purchase, so I've been making smaller purchases on tech. Now, I have one more item I wish to buy, and technically, I could pay it out of my pocket, but my budget is a bit tight for that right now. By purchasing this, my credit card balance will exceed 30% of the the limit, and I've been told that I should keep my balance below 30% to not hurt my credit score. Will I be hurting my score by keeping my balance over 30%? I will still make the minimum require payments monthly.

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Your utilization ratio history is irrelevant to its impact on your credit score. If you run up 80% of your utilization In January, then pay it back to 10% in March, your score in March will reflect the new reduced ratio with no memory of the 80% utilization last month.

With that said, don't go around overspending just because you have 0% apr for a little bit. Spend what you would spend with cash.

  • Okay, so when will the utilization ratio ever affect my credit score? I will definitely have income in the near future that will enable to me pay back the entire balance. I was just curious as to how, if in any way, my credit score could be impacted by my action. Thank you. – Skipher Jun 21 '16 at 18:54
  • In my example, your score would be impacted between the January reporting and the March reporting. – quid Jun 21 '16 at 19:07
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Don't plan your finances around your credit score

I cannot stress this enough, so I'll just repeat it: Don't plan your finances around your credit score. Don't even think about your credit score at all. Plan a budget an stick to it. Make sure you include short and long term savings in your budget. Pay your bills on time. Use credit responsibly. Do all of these things, and your credit rating will take care of itself. Don't try to plan your finances around raising it.

On the subject of 0% financing specifically, my rule of thumb is to only ever use it when I have enough money saved up to buy the thing outright, and even then only if my budget will still balance with the added cost of repaying the loan. Other people have other rules, including not taking such loans at all, and you should develop a rule that works for you (but you should have a rule). One rule shouldn't have is "do whatever will optimize your credit score" because you shouldn't plan your finances around your credit score.

All things considered, I think the most important thing in your situation is to make sure that you don't let the teaser rate tempt you into making purchases you wouldn't otherwise make. You're not really getting free money; you're just shifting around the time frame for payment, and only within a limited window at that. Also, be sure to read the fine print in the credit agreement; they can be filled with gotchas and pitfalls. In particular, if you don't clear the balance by the end of the introductory rate period, you can sometimes incur interest charges retroactively to the date of purchase. Make sure you know your terms and conditions cold.

It sounds like you're just getting started, so best of luck, and remember that Rome wasn't built in a day. Patience can be the most effective tool in your personal finance arsenal.

p.s. Don't plan your finances around your credit score.

  • The title and question ask "Will I be hurting my score by keeping my balance over 30%?" I read your answer twice, and I'm thinking this is a great answer to a different question. – JoeTaxpayer Jun 22 '16 at 16:26
  • Yeah, I debated that myself. Seems like these questions about credit score optimization come up a lot, and this one just caught me in the right (wrong?) mood. – Nobody Jun 22 '16 at 20:40

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