Home > Credit Score > A Credit Score Lifehack: Will It Work?

Comments 0 Comments

Credit.com member Steven is a recent college grad who is already on track to building great credit. He wants to do everything possible to make sure his score is as strong as possible. He writes:

I am a recent graduate with a full-time job, and I am doing everything I can to help improve my credit score. I have never missed a payment, and I always pay in full. I have a good mix of accounts — a car loan, a few student loans, and a handful of credit cards.

One thing I want to continue improving is my debt utilization ratio. Right now, it is at about 20% according to my free Credit Report Card on Credit.com. I want to bring it below 10%, as I have read that this is what gets you the maximum score.

I have applied for some credit limit increases, and I always watch how much I spend on my cards. I use them like debit cards. In other words, I never spend more than I have available in my checking account.

I had an idea, and I wanted to ask you if I was thinking through it correctly. Normally, I just wait for my monthly statement to be available then pay it in full immediately. But, I was wondering: If I pay my balance every week rather than wait for the entire month’s statement, will this lower my debt utilization ratio? I am not sure how they calculate it, but I assumed my method will help me lower my ratio.

Credit Score Lifehack for Debt Usage

Steven’s off to a great start and should be congratulated for taking such a proactive approach to his scores. But could he do better if he lowered his utilization ratio?

Utilization ratios are calculated by taking the current balance on each revolving account — as listed on your credit report — and dividing it by the credit limit. If a credit limit is not available, the highest balance ever reported on that account will usually be substituted. Move the decimal point two places to the right after doing this calculation, and you’ll have the utilization ratio. If your credit limit is $1,000, then a balance of $700 results in a 70% utilization ratio, while a balance of $70 results in a 7% utilization ratio.

I used that example for a reason: FICO says that consumers with the highest scores typically use 7% of their available credit. It’s not a magic number though. And the utilization ratio is only one part of your score. So it’s still possible to have a high score overall even though you are using 20% of your available credit on a given account.

Consumers who want to better understand what factors are affecting their credit scores can, like Steven, use Credit.com’s free Credit Report Card to get their credit score and a breakdown of the factors affecting their scores.

My advice to Steven is this: If you still want to try to get this number down, then paying your bills sooner may help. The key here is to try to get a sense of when your issuers report, and that’s sometimes tricky to figure out. Check your credit reports and compare them to recent billing statements to see if you can tell when they are reporting. Some may report at the close of the billing cycle after your payment has been posted, and some may report before or after that.

You don’t have to pay weekly, though. After all, your issuers won’t report information to the credit bureaus weekly. What you do have to do is to make sure the balance reported to the credit reporting agencies is as small as possible.

To do that, you can try to pay your balance in full after the issuer notifies you that your new bill is available, but well before the due date. Then avoid making purchases that push you above that 10% mark until at least a few days after the close of the billing cycle. If you do that, then it’s likely that the balance reported by the issuer will be smaller.

A Strong Credit Score

Another strategy might be to use your cards less for a couple of months and see what it does to your score. If it helps, then you know you either need to try to stay below that ratio on your current cards or add a new one so you can spread out your purchases a bit more.

Before you go to all that trouble, though, you may want to ask yourself what your goal is here. If your score is already high, trying to tweak it may get you a higher score, but no tangible benefits. Remember, the goal of having strong credit scores is to get the best deal a lender has to offer. Every lender has its own standards, but generally there’s not much difference in financing options for someone whose scores are in the high 700s vs. the 800s.

As my fellow Credit.com blogger Deanna Templeton points out, “Lenders aren’t looking for perfect, they’re looking for low risk.”

Image: iStockphoto

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team