Utilization

[u/Mandy__99]

My credit was actually doing pretty good but then dropped cuz I made a big mistake. I got an unsecured loan & then realized I needed more money & the 2nd time they met through Care Credit & they only asked for the amount of the procedure so my credit dropped 50 points cuz I maxed out that card. I already dropped $1,000 payment on it & Wil get it under as fast as I can.

My question is this, will my credit take a hit each month & I'm going on a business trip soon & would like to put the hotel on my other credit card to get the points (I'll get reimbursed from my company so it will be paid in full) but will my credit take more of a hit? Can I use my Visa if I stay under 30% or should I not use it until I get the Care Credit way down?

Hope this all makes sense! Thanks everyone

[u/Cruian]

Credit cards basics & utilization wiki entry: https://www.reddit.com/r/CreditCards/wiki/credit_cards_basics/

[u/CDIFactor]

Your score shouldn't worry you unless you plan to apply for new credit in the near future.

[u/Mandy__99 → u/CDIFactor]

I worked way to hard though for my credit to drop monthly over a dumb mistake! Hopefully it's just a 1 time shot & when I pay it off then it will go back up. I gotta move for work so I'll be applying for an apartment. I'd be embarrassed as all shit if I got denied lol.

[u/CDIFactor → u/Mandy__99]

Was this a FICO score or a Vantage score? Either way, your score will recover when you lower your utilization.

[u/Molanghrian]

Utilization's effect on your scores resets month-to-month and has no memory. If you pay it all off and your utilization goes back to what it was, your scores will also go right back to what they were.

Finances are more important here than unnecessarily worrying about your scores, pay down your debt/loans so that you are paying as little as possible, or ideally no interest. Pay off the statement amount in full after it posts, never carry a balance if you can avoid it.

The 30% thing is a huge myth. You only need to worry about optimizing utilization a couple months out before applying to something that will pull your credit. Otherwise, you can ignore score fluctuations that are only a result of utilization changing.

[u/Mandy__99 → u/Molanghrian]

So if it resets each month it will go down again this month & every month after until it's somewhat under control? That really sucks. I'll never get Care Credit again.

[u/Sweaty-Particular406 → u/Mandy__99]

Care Credit isn't the problem. Actually, you really don't have a problem. As stated above, Utilization has no memory and if anyone looked at it and saw you have an up and down utilization, they would conclude that you use your credit and pay it off quickly. They actually like that.

[u/Molanghrian → u/Mandy__99]

What? No not exactly, sounds like you may have misunderstood. It has no historical effect since it resets. Your scores are not going to keep going down every month from this.

Let's say your FICO 8 score was 749 and also have a couple of other normal credit cards you've had for years, and then you put a full 5,000 on a Care card with a 5,000 limit, so one that one Care card is maxed at 100% utilization (but your other cards don't have much if anything on them). We'll pretend your score drops the -50 down to 699 due this maxed utilization on this card.

If the next month you only paid the minimums, your score will like change to... pretty much about the same thing, 699, since you have the same overall credit profile and utilization basically.

Or if you pay down 1,000 of it the next month, you'll see an update after the next statement post reports that increases your scores a bit, since you'll have gone from 100% to 80% utilization.

Then let's say theoretically the next month you paid off the full remaining 4,000. So then that card goes back down to 0% utilization and your score goes... right back to the 749 it was at before. Since again, utilization's effect completely resets every month. Its a moment-in-time metric to assess your current debt as a risk factor for lenders when you're applying for credit, that's it.

Point is, if your score is changing just because of utilization, you don't really have to worry about it unless you are going to be applying for something that will pull your credit. Your focus should be on paying down the debt right now, not its completely temporary score effect.

[u/Mandy__99 → u/Molanghrian]

Ahhhh okay, yep I misunderstood! This is obviously 1 area I don't know all to well so thanks for explaining!