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I recently took a big hit on my credit score it went from 730 something to 686 from utilizing 60% or so of my credit card balance.

I use my credit card for almost everything and pay off the balance in full each month and would like to continue doing so because I get a flat 2% cash back on everything.

My credit limit is $7,000. I requested that it be raised but I was denied. I have an income that is more than enough to cover this limit, so I don't know why it was denied I'm still waiting for the answer. Regardless, should I apply for new credit cards and not use them? Stop using my credit card (I would prefer not to because 2% cash back on everything adds up a lot).

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    Use cash, I mean just ask your question out loud and you should be able to come up with an answer. – Pete B. Sep 21 '16 at 18:32
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Verify that there is nothing fishy in your credit report. That could be a reason.

Otherwise, you might be in a chicken/egg situation - your high percentage of use reduces your credit score so you don't get a higher limit which in turn keeps your usage percentage high. You can get out of that by paying off your credit card one or two days before the billing cycle closes. That way, they will report a very low usage (they report the amount on the bill), and your credit score will look better.

Taking another credit card is a possibility, and probably not a bad one. If you are convinced that you can manage your credit possibilities (meaning not overspending), that should be a good solution, especially as it gives you a backup card.

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I think you need to look at your situation from your lender's eyes. They have a borrower whose account is sitting at ~60%+ utilization and the billing period isn't over. The automated online credit line increase function will likely come to the determination that you made a big purchase that you won't pay off immediately. In situations like this you have a much better chance at talking to a human.

Obviously there are a couple near term fixes:

  1. Spend some cash on some of your purchases, or
  2. Make a mid-cycle payment

Personally, I think mid-cycle payments are too much work. I don't want to log in to my credit account and make payments all the time.

If I was in your shoes, I'd assess this month's spending. Was this month a normal month or did I make some one time large purchase?

If this is my normal spending volume I'd make a mid-cycle payment of the current statement balance, then call the lender and ask the rep for a line increase. Point out your payment history. Tell them you spend everything on this card and would like to continue to do so, but you're overspending relative to your limit and that makes you uncomfortable.

If this was a one-off month with some large purchase thrown in, I'd do nothing. Your credit score only matters if you're shopping for credit. While it's important to have a good sense of your financial picture and check in on your credit periodically to ensure nothing is wrong, there's no sense in losing sleep because your unusually high utilization this month has impacted your score, it will be right back to normal next month (barring any other unforeseen unusual expenses).

  • Well I did call them as well, but the person over the phone simply went to the web application like I did, asked the same two questions the web app did (salary, rent) and gave me the same response "Denied and you will receive a reason in the mail". I'm sure the letter will describe a way to appeal it, I just need to be able to contact someone who can actually make a decision. It is CITI bank FYI. And to answer your question it is normal spending – James Wierzba Sep 21 '16 at 18:58
  • @JamesWierzba, there's usually a reconsideration phone number. I don't know how Citi handles it, but maybe it will be included on the letter you'll receive. I'd call again and explain the situation to the rep and ask for reconsideration. – quid Sep 21 '16 at 19:00
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Credit utilization only impacts the credit score at the time it is reported. The next time your creditor reports your utilization, that will be the percentage used to score you. So, if the next time it is reported as 2%, your score will go back up.

You were probably declined for a credit limit increase because the creditor sees no reason to extend you more credit on the existing account, not because you are not creditworthy. Furthermore, reported income is only part of the picture, because the creditor has no way to know what your expenses are.

If you wish to give yourself more room to make larger purchases without dramatically increasing your utilization ratio, the most obvious way to do it is to apply for more credit. However, given that your existing creditor denied your request for a limit increase, I would be careful about applying for additional lines of credit. Alternatively, you can make purchases, and as soon as they post to your account, you pay it off, regardless of the balance due date. This ensures your utilization is low no matter when the creditor reports it to the bureaus.

  • Your creditor(s) don't report utilization. They report certain account datapoints and utilization is easily derived and weighed by the bureaus... – quid Sep 21 '16 at 18:36
  • @quid They report the balance and the total limit, which in effect is the utilization, so while you are correct, it is not particularly salient to the OP's question. – heropup Sep 21 '16 at 18:38
  • I really like the idea of paying it off immediately after using it. I could keep my balance low while still getting 2% cash back. – James Wierzba Sep 21 '16 at 18:40
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    @JamesWierzba - that's the answer. No need for multiple payments beyond the one large payment just before the date the bill is cut. You'll see a sub 5% utilization in no time. (Literally next billing cycle) – JTP - Apologise to Monica Sep 21 '16 at 22:54
  • @JoeTaxpayer On what date would they take the data point containing credit limit + balance? The last date of the billing cycle? The date the bill was paid? Some other day? – James Wierzba Sep 22 '16 at 14:14

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