Credit Utilization Ratio; >30%? As low as 10%?

Nasqueron

Gold_bullion said:

Nasqueron said:

Gold_bullion said:

I've played around with this extensively over the years and I reckon it DOES matter even if you pay off your cards in full - it's just that most people who do so will happen to stay below 25% utilisation of their TOTAL credit limit anyway, so it isn't a factor for them.

The first thing to realise is that the day-to-day "balance" on a credit card is not what is reported to the CRAs. They only get told the STATEMENT balance and they are blind to what has been put onto or paid off a card between statement dates.

Also, even if you are deliberately maintaining a balance on a card at 0% APR and making the minimum payment having paid a fee or taken out a new card with no BT fee, your credit score will improve if you keep the balance below about 75% of the INDIVIDUAL card's limit. Above this it will damage your score, even though the CRA should flag it as a promotional rate.

You might do this in the current environment as it is perfectly possible to make a 3%+ arbitrage over what has been paid in fees for BTs (easily sub 2% annualised at the moment) by keeping the money in a bond or an instant access account (ISA even) at over 5%.

However, the OVERALL 25% CC utilisation rate is still important and it will damage your score with all 3 UK CRAs if you exceed this (remember based on STATEMENT balances). Experian also seem to have a monetary limit of around £30-35k on credit cards, even if it's all at 0%, beyond which it will damage your score. It's quite easy to achieve an excellent score with Equifax and Transunion with this level of CC debt (and indeed 1000/1000 with ClearScore who use Equifax) but Experian seems to peak out at about 920/999 ("Good").

Of course if you're meticulous and you have a heavy spending month you can simply make an extra payment to the CC so the extra spending doesn't get reflected on the statement, and hence you can maintain the required utilisation figure if you need to maintain good CRA scores, perhaps in the run up to a re-mortgage or whatever.

You can also, with their permission of course, utilise your partner's CRA "headroom" to keep you both below 25% overall utilisation. Many couples simply use one or more cards of one of the partners with additional cardholders added to the accounts for the other partner, but then the main cardholder's credit score is bearing the full brunt of the spending. By balancing the load across each partner on cards in their own respective names, the "over-utilised" partner can improve their score with no detriment to the "under-utilised" partner, thus giving a better overall CRA presentation to lenders potentially before, say, a joint mortgage application.   

The score is irrelevant as only you see it

Many people have balance/money transfers on cards at 0% with utilisation well over 25%, often 90-95% early on and bounce the debt along onto other cards at 0% without issue. If you have an interest bearing debt then the utilisation may be a factor but the fact you have debt you can't pay off every month is far more of a worry to potential lenders.

It's not irrelevant as it's the closest thing you're gonna get to a "score" of what lenders may think of you, particularly if you monitor all 3 CRAs on a regular basis. To say otherwise is to say that the CRAs are deliberately misleading you as to your credit worthiness with lenders, which would be against their interests as they are trying to flog you credit via their sites, from which they get a commission.

What I'm saying is that if you go above 25% TOTAL utilisation on all cards, your scores will take a hit and lenders won't offer you new cards with any kind of decent limit. It's a different story on INDIVIDUAL cards - as you say these will often be c. 95% utilised when a BT deal is first taken. 

The score plays no part in any lending decision, what CRAs think of you is irrelevant, the score is irrelevant as it is not used in any lender decision

Your score taking a hit - see above

Also I have more than 25% utilisation on multiple cards and overall (currently 37.1%, has been higher) , my fake score keeps going up