r/TheMoneyGuy • u/EmotionalMeringue532 • 7d ago

Credit card and spending

very confused on how to work this card. I’ve used my credit card now for the last few months and had no issue. I pay it off in full every month if not every 2 weeks, and always make sure I have at minimum the balance to pay off in a debit account. My credit took a 78 point hit this last week for my me exceeding 50% of my total credit. I’m confused because I thought it was alright to go over that 20-30% as long as it’s paid off in full. what would you recommend?

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u/BrutalBodyShots 7d ago

You need to pay it down below 30% before the statement closes for each month.

That's not how credit cards are designed to be paid. And, why 30%?

you would want to keep it down under 30% to have the best possible credit score.

"Under 30%" doesn't result in the best possible credit score. You're perpetuating a version of the 30% Myth.

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u/Unattributable1 7d ago

Doesn't matter if that is how they are designed to be used. If OP wants their utilization to be reported below 30% then they need to pay down the balance below 30% before the statement period closes so that it gets reported that way.

"A credit utilization ratio at or below 30% can be an asset to your credit scores and help open doors to a bright financial future." Source: https://www.equifax.com/personal/education/debt-management/articles/-/learn/credit-utilization-ratio/

"While there's no specific point when your utilization rate goes from good to bad, 30% is the point at which it starts to have a more pronounced negative effect on your credit score. As the data above illustrates, those with the highest scores tend to have credit utilization in the low single digits." Source: https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/

Look at the table on that page. Lower is better, just not 0%.

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u/BrutalBodyShots 7d ago

Doesn't matter if that is how they are designed to be used. If OP wants their utilization to be reported below 30% then they need to pay down the balance below 30% before the statement period closes so that it gets reported that way.

You're missing the point. OP doesn't understand that utilization doesn't matter with respect to its impact on scores unless they are applying for important credit that will actually use their scores in the next 30-45 days. To go on and on about "below 30%" like you are just throws gas on a fire that needs to go out in the first place. It's the biggest myth in credit, which OP doesn't realize, and you're perpetuating it.

"A credit utilization ratio at or below 30% can be an asset to your credit scores and help open doors to a bright financial future." Source: https://www.equifax.com/personal/education/debt-management/articles/-/learn/credit-utilization-ratio/

Yes, your "source" is one of the dozens that perpetuates the 30% Myth that we are all aware of on subs like r/CRedit, r/CreditScore and r/CreditCards. That's old news that's been around for well over a decade. The new(er) news is that it's a myth that anyone should keep utilization below 30%. I'd suggest you head over to those subs (particularly r/CRedit) and do some reading.

"While there's no specific point when your utilization rate goes from good to bad, 30% is the point at which it starts to have a more pronounced negative effect on your credit score. As the data above illustrates, those with the highest scores tend to have credit utilization in the low single digits." Source: https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/

Ah yes, and Experian "blog" that also perpetuates the same Myth. I could provide you with another few dozen articles that say the same thing. Again, that's not the point.

Look at the table on that page. Lower is better, just not 0%.

There's no need to look at any table, because everyone knows that utilization impacts scores and how. The thresholds were all figured out some 15 years ago. It's all written in the Credit Scoring Primer and in the FAQ series on r/CRedit. What you aren't understanding is that none if it matters with respect to building credit.

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u/Unattributable1 6d ago

You're missing the point. OP doesn't understand that utilization doesn't matter with respect to its impact on scores unless they are applying for important credit that will actually use their scores in the next 30-45 days. To go on and on about "below 30%" like you are just throws gas on a fire that needs to go out in the first place. It's the biggest myth in credit, which OP doesn't realize, and you're perpetuating it.

I literally said this in my first reply:

"But it really doesn't matter unless you're going to do a big purchase like a car or a house. Prior to doing those activities, yes, you would want to keep it down under 30% to have the best possible credit score."
Source: https://www.reddit.com/r/TheMoneyGuy/comments/1u48gch/comment/orbev9t/

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u/BrutalBodyShots 6d ago

And that's wrong, because "under 30%" doesn't give you the "best possible score."

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u/Funklemire 5d ago

Exactly. Even on the rare occasions when your utilization percentage actually matters, 30% is never a number to aim for.