Submitted by New-Row7111 t3_126c8kc in personalfinance

For reference: I (22m) am a college student and I currently have a $700 limit on my CC. I also pay a $300 monthly car loan. For both of these, I pay off in full, on time for every statement date each month.

I got my first CC when I was 18 and mainly use it for occasional yet fixed expenses such as gas, eating out, groceries, and the occasional entertainment ticket (sports, concerts, shows, etc) once every month or so. Given that I am on a meal plan and am housed in a dorm, I rarely find myself eating out and don't have to pay rent as well as driving around so my current and normally expenses have been low at school and as a result, I usually stay under $200 on my CC per month.

As I said earlier, I pay my card off in full on the due date every month since receiving my card and have built an 805 credit score which has been that way for a while give or take; sometimes it goes as high as to 808, sometimes it drops as low as 798. This past month, I ended up spending a little extra on a plane ticket to visit my family for spring break which was an additional $300 which ended up being a $366 final statement. Again, paid it off in full on the due date.

I usually get weekly credit reports through Mint, which is an intuit company for those unfamiliar. I got an alert that my credit score dropped a significant amount (more than 10 points). I checked and it decreased to 775; I know that's still good but I was confused.

I got a tip from Mint that because I used around 40% of my credit utilization, that has a high impact on dropping credit scores. I want to buy baseball tickets for opening week on Saturday and by doing the math, it seems like I'll go over 30% utilization on my next statement which apparently is a factor.

So I guess my question is why do credit companies penalize you if you spend a lot on a credit card, especially if you pay it back on time in full like I've always done? They always say that putting things on a credit card and paying it back on time builds credit and I am doing exactly that. I know this is a really stupid thing to be nervous about but as a young adult who wants to be able to qualify for loans and all that I want to know what effective tips I can use to make sure this doesn't happen. Any help, tips, or advice would be greatly appreciated!

Edit: Thank you all so much for your inputs and advice! This morning I called my bank and extended my limit to $2,000 (still a college kid and don't want to bite off more than I could chew so I didn't get a $10k limit like a couple of users suggested). Hopefully, this will help and if for some reason(s) I have to spend more money, I will make multiple monthly payments like others also suggested. And finally, yes, I know my credit score is "top tier" but I wanted to make sure I don't drop it another 25 point if I have another high spending month. Thanks again guys, the Reddit community never fails!



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nkyguy1988 t1_je8lhso wrote

Utilization resets monthly and has no tracking. It's pointless to worry about month to month, so use it if you want. If you do have a need for credit inquiries, make a couple extra payments and keep the utilization low when it gets reported for that month. Manipulation of utilization is easy.


joebenson17 t1_je95l7p wrote

Another strategy is to ask for a higher credit limit. This can typically be done online and only takes a few seconds. Over a few years you can increase credit limits 5-10K. For more immediate relief get another card.

People need to stop worrying about the numerator in credit utilization. Use your cards responsibly and pay them off in full every month. The key to lower utilization is in the denominator, which is easy to increase by just asking for it. Do this every 6-12 months.

OP if I were you, I would ask for a credit increase to $3,000. Even if you don’t get the full amount you will still get an increase. This will cause your CC utilization to go from 50% with the plane ticket to like 15%.


avalpert t1_je8nevp wrote

The mistake you are making is tracking your credit score regularly.

Behave responsibly with credit and the score will follow. Don't worry about it - it doesn't matter much.


CherishAlways t1_jeadqs3 wrote

Worry about it before buying a house, then forget about it again


InteriorAttack t1_je8lcoi wrote

Apply for a higher limit credit card and this won't be an issue. Your credit is top tier stop worrying about it


New-Row7111 OP t1_je8lkcw wrote

The card I currently use is through my bank. Can I have them extend my credit limit or do I need a new card completely?

Edit: "or do I need a new card completely"


JustASrSWE t1_je8m0v9 wrote

You can typically call the bank and put in a request for a higher credit limit. Some banks will let you do this online. You shouldn't have to get a new card.


Full_Prune7491 t1_je8rb0s wrote

I just log in online and click credit limit increase button. Bang 5k increase.


DinkleButtstein23 t1_je98l6k wrote

Yup, I've always done it this way. They've also given me increases without me even asking. I have a total limit of around $30k or $35k with 2 cards.


micreyes11 t1_jea0jbk wrote

Is it still a hard pull if you get a CL increase this way?


Full_Prune7491 t1_jea10ga wrote

Not sure. People are obsessed with hard pull. Soft pull. Again credit is only important when you need to borrow money. Don’t this when you are applying for a mortgage if you are worried.


bury-me-in-books t1_jedqo3u wrote

I had a bank employee tell me recently that if I wanted more info on the loan I was looking at, they would need to do a hard pull on my credit, and that it would be a 10% hit on my credit score. I'm not sure she was right, but I'm not willing to test that lol. I told her thanks for what info she could give me without the credit check, and then made a mental note to see how much a hard pull would actually affect my score by researching online, without doing one until I had to.


ecohen2010 t1_jecdnbn wrote

I have never had a hard pull for any credit limit increase.


Retrooo t1_je8m4em wrote

You can ask them to raise the limit on the credit card you have. But also, you really don't need to be worrying about this.


ahj3939 t1_jear4s2 wrote

Why not both?

Ask your bank for $5k limit, wait a month or two, and then apply for a new card from a different bank.

Higher limit on existing cards will get you higher limit on new cards.


RO489 t1_je9a8tf wrote

You do not need a new card, but if you aren’t getting good rewards on your back card, you may want to apply for a different cash back card


houdinikush t1_je8mfzv wrote

Go to your local bank branch and ask them for a credit limit increase. You might have to sit down with someone for a few minutes and “apply” for it and verify all your information. If you’re approved they will increase the limit to the request amount.

I just did this last week. Asked for a $600 increase and I was approved. I’ve had this card for over 5 years and I’ve had a couple missed payments over the years.


bury-me-in-books t1_jedqg4k wrote

Don't get a whole new card unless you plan to keep it for awhile, because the age of your credit helps you, and if you add a new card on, in the short term, it will bring your credit age down, and therefore your score down. If you decide to get one, do it to either get a better interest rate for the long term, or to get rewards that you will bank and use in the long term, but just know that in that scenario, in the short term, it might bring the score down. It is a good idea if you're playing the long game, though.

Examples when this might happen: you get engaged and want to go on a honeymoon in a year or two. You could get a travel card, and make loads of purchases through it, paying it off as you go, and then accumulate travel rewards to a free flight on that honeymoon.


micha8st t1_je8q85o wrote

How are you penalized by a low credit score?

A: Only if you want to borrow more outside your existing debts.

The credit score is there to make it easier for potential creditors to rate you. So they don't have to spend a half hour asking about your salary and your first born and what elementary school you went to.

If you're not going open a new debt anytime soon, your credit score isn't a big deal.


bury-me-in-books t1_jedqxvn wrote

To add to this, it can change fast as well. I had a score that was rather low, because I was barely making enough to pay my bills, and because I was carrying balances. I was seeing my score sit pretty still around there for awhile. Now I got a full time job around months ago, and my score shot up probably 200 points. Same bills, but the score changed because the circumstances changed.


micha8st t1_jef2yzr wrote

yep, it can change fast.

But it can change slow, too.

I once "broke the utilization rule" and went way over 30% across all my credit cards. My score dropped like 40 points all at once, and then came back most of the way when I paid off the balances in full, by the due date.

I've heard that you won't recover quickly from is delinquency. If you keep paying late, or worse just skip payments altogether, that is hard to correct.


Feroze895 t1_je8ltwn wrote

Find out when your statement close date is. Whatever the balance on your is on your statement close date, that is what will be reported to the credit bureau. So, you can use all $700 of your credit limit. But if you pay off $600 before your statement close date, obit $100 will be reported.

And if you have 800 credit score, get a new card or ask for a limit increase.


IceCreamAndBroccoli t1_je8r4bn wrote

No one is really answering your question.

If a bank gives you a credit line of $700 they’re essentially saying that’s the maximum amount they think you can afford to borrow at that time (based majoritively income). When you’re utilization goes up, your credit score goes down because it’s basically an indicator to other lenders that you are close to the maximum amount you can afford to borrow. Because your credit is younger, your revolving credit ends up being a bigger factor. As others suggested your solution to lower utilization is to increase your credit limit to essentially prove you can afford to borrow more. The trick here is to not let the higher limit entice you into spending more. Banks actually want to give you a limit slightly more than what they think you can afford but not more than what they think you’ll ever be able to pay back. Then when you can’t pay a monthly statement in full, they get to charge you additional interest.

And I’ll reiterate what others have said. 775 is still great at your age. Utilization will also have a smaller affect on your overall credit as it ages. Missed payments are the real killers, so I’ll repeat: don’t borrow more than what you can actually afford to pay back each month. Don’t let the higher credit limit make you think that’s how much you can actually spend.

Highly recommend this article on the origins of the credit card.

TLDR; you’re encouraged to use your credit card because banks make money when you do. You’re penalized for high credit utilization because it’s essentially an indictor that you’re nearing your borrow limit.


i_get_the_raisins t1_je8mxwi wrote

In the big scheme of things, $700 is a very low credit limit. With good enough credit (and the discipline to not spend money just because you can), it's not unreasonable to have multiple cards each with limits in the $10k - $30k range.

With that in mind, the advice of "put your spending on a card" and "keep your credit utilization low" isn't as contradictory as it seems. You can get a few cards, build up $75k - $100k in available credit, and easily put a month's spending on them without pushing your utilization above 5%.


True_Appearance_7155 t1_je9epm1 wrote

Exactly this. I have around 100k to 125k in available credit that I've requested over the years. I try to put absolutely everything and anything I can on the cards. Firstly I get at least 1% back on all of my cards for anything type of purchase but the best part is it organizes my monthly cash flow nicely. I can keep money in savings or investment accounts most of the month and move money to checking to pay the CC's off before the bills are due. I don't have to worry about just how much I have in my checking account when I make a purchase.


Full_Prune7491 t1_je8rpc2 wrote

I think you might want to think of your credit score in a different way. The way I explain it to people is that your credit score is the measurement of your ability to borrow money and more importantly your ability to pay it back. That’s why people who can already borrow money can borrow more money easily. If someone else is willing to lend you money then I would too. Lower risk. So the greater your balance means more risk to pay it off so your score drops. The banks aren’t out to get you. They are in the business of making money.

Also there is no need to constantly check your credit score. It’s only important when you need to borrow money.

Keep paying it off every month. Request an increase to your limit. Open one more card. You will be fine.


DeCarp t1_je9cduh wrote

Don't sweat it. You're fine. Credit scores fluctuate. As long as you're paying your bills in full and on time, you're good. There will come a time when the score is more important, like if you apply for a mortgage. Till then, don't worry about it.


SharkWeekJunkie t1_je9h7u5 wrote

They are paying a game with you and your money. That’s why it’s called a score. And guess who made the rules. They did.


RedPandaLovesYou t1_je9iy5l wrote

To extract more profit and to trap us in debt

Profit and control are the answers almost every time


larkdaddygaming t1_je9qh8d wrote

I just got penalized for having too low of credit utilization. Don’t you know there’s a secret recipe for success that no one will tell you?


Bad_DNA t1_je9rrh6 wrote

How are you penalized -- what does it cost you? Unless you are going for a loan immediately, what does it actually cost you?

The purpose of promoting the use of credit cards is profit motive -- every swipe you make costs that merchant. In turn, they raise prices to recoup that cost so you pay more. You now have debt -- so if the credit company gets lucky, you don't pay your whole bill every month. (kudos to you, OP, for not being that debt slave). Beyond this, your utilization doesn't cost you anything. If you want to do the experiment, stop using the card for two months running. No credit charges. THEN apply for the loan you need (don't, I'm not pushing debt -- this is just a lame example).

You are right -- this is not a thing to be worried about as a young adult. You need to be far more worried about all the debt our generation left you. We were pissed that our parents were leaving us a lot of debt, and we've left you 10x more. Sorry about that.


bettytomatoes t1_je9xiq8 wrote

The solution is to get more credit and not use it. So, either a higher limit on the card you have, or an additional card. Use the additional card once in a while, like for one load of groceries a month to keep it active, and pay it off like you do. You have a good score, so it shouldn't be hard for you to get another card. You're doing everything right. This is not something to worry about.


ChiMello t1_jea65c2 wrote

For one thing, utilization is based on your balance when the statement is generated with most credit cards (a few report more than monthly but for most the statement balance is the % that gets reported). For example if your balance on your statement is $650 on your $700 card, your utilization that your credit card company will report that month is going to be nearly 93%, even if you pay the entire $650 before the due date.


HenryMortgage t1_jeg01c1 wrote

One other thing to keep in mind... When applying for credit, 760+ is usually the category of top tier credit. Having a 761 or an 845 gets you the same interest rates and the same opportunities. Be proud of your credit and as long as it stays over 760, your golden!


Grevious47 t1_je8sg17 wrote

You don't get penalized for high utilization...not really. As long as you aren't overspending on the card to the point you can't pay it off whenever you are absolutely fine. You could 90% utilize your card for years and then decide that next month you are going to get a car loan and so you pay your car off in full and your score will be just as high as had you kept your utilization low all that time. Negative impacts on credit score from utilization are ephemeral and go away as soon as you pay down the card...they don't last.

People freak out about utilization and it really does not matter. Honestly...don't worry about it at all.


meep_42 t1_je8to7h wrote

The info about raising the credit limit is good, I’d also consider opening a second card while you’re young to increase your average age of account when you actually need credit later in life. You can stick this new one in the freezer or just put a recurring subscription on it and forget about it.


holeshot1982 t1_je8vod4 wrote

Best advice I can give is do what I do… pay it off every 2 weeks…. Also don’t think you can get out of the high usage amount with a 700 limit. Need to get the limit increased


Lone_Soldier t1_je96pqf wrote

You can request a credit limit for your card. Also, having more cards will increase your overall limit.

$700 is a very low limit.

I have 5 cards with a total credit limit of 85k.

Do I use 85k a month? No lol. I spend $700-$900 a month on my cards (paid in full every 4 weeks).


SavingSmarterSept t1_je9888u wrote

They don't penalize you for spending a lot. They penalize for carrying debt for a long period of time. For example, if you purchase and pay off, then no impact on your credit score, but if you purchase and keep that debt, then it'll impact your credit score until you pay it off.


salmiakki1 t1_je99sby wrote

Great job with your credit! Perhaps shop around for a second CC. Look for good cash-back offers. Sometimes one card is better for buying gas, while another is better when eating out. Also, sometimes there are offers that only apply to Visa or MC, so it's nice to have one of each.


mega512 t1_je9b3t1 wrote

Let's be honest, credit is a scam. That number should not control your life. I will say if you use credit that is fine, but the expectation is you also pay it off and not accumulate more debt.


Otherwise-Way-1176 t1_jeb8b53 wrote

>Let's be honest, credit is a scam.

A credit score is a product that is sold to lending institutions, not to the OP. Therefore, the OP is not being scammed by the mere existence of their credit score. You could hypothetically be attempting to paint banks as victims of this scam, but they’re informed consumers who know what they’re buying, so that seems overly generous to me.


Notthegreatestcook t1_je9dvb8 wrote

With a credit score of around 800 you should have no problem getting an increase. I’d say request 5k and see what they come back with. Keep what you’re doing and that utilization factor will be off the radar on a month to month basis.


Becsisag t1_je9kzia wrote

A good credit score is only worth it if you’re using it. Continue to use your card as your are and don’t worry about the temporary decreases.


redditenjoyer737 t1_je9n7k2 wrote

You are spending way too much time and energy obsessing over your credit score. You're likely also over-spending because you have the ability to charge. You "spent a little extra" because it was easy and convenient because you had the headroom on your credit to do it. Had you had the cash on hand, you might have decided not to spend it.


voyagertoo t1_je9p9xe wrote

Do they even track this (utilization amounts) if it's always paid before due date?


hops_on_hops t1_je9qlr1 wrote

You don't get penalized for high credit utilization.


leadfoot9 t1_je9r1lv wrote

You're just starting out, and your limit is tiny. It's pretty easy to get a $50,000 credit limit spread over several credit cards, at which point even $5,000 of spending per month is only 10% utilization.

With that being said, the reasons for using the card have nothing to do with credit score. They have to do with convenience, security, and earning cash back or other perks.

In the meantime, you can pay off your card every week to keep your utilization low, if you need to goose your score. But your score only matters if you're applying for more credit (e.g. getting a mortgage), so if that's not the case you don't need to worry about it and can let your score increase naturally.

Actually, it sounds like your score is already fine. Don't worry about it. 5-10 point changes are just normal fluctuations.


MissLesGirl t1_je9z3lx wrote

If you use a high amount, the score drops quickly, the day it's reported, but when you pay it off, it could take a few months to go back up because they don't know if the balance will stay low, you might charge to the limit again.

Also if you use near limit and pay in full each month several times in a 6 months period, that bank might raise the limit. But not if you usually keep the utilization low.

They need to see a pattern of high usage and full payment. But the credit report doesn't say that you paid in full because you keep a high balance.

What you could do is use high utilization every other month so the credit report shows that you are paying in full and charging more.


LittlePrinceKitty t1_jea39jy wrote

If you are going from 798 to 808 you have nothing to worry about. That is excellent credit. Just keep doing what you’re doing.


txholdup t1_jea78s4 wrote

The credit card companies don't penalize you for using your card, it makes them happy. Your FICO score is determined by the consumer credit reporting companies, Experian, Equifax and TransUnion. They use the data reported to them by the credit card companies.

But if you aren't getting a loan or buying insurance, now, your month-to-month variations don't matter much. The thing you can control is use of your credit card and taking steps to raise your very low limit.

If you aren't getting cash back for "charging everything" why are you doing it? But going over the limit, once in a while, doesn't matter that much. I have a $25k limit on one of my cards and went over 30% utilization twice last year. My FICO bounced back.


YouKnowHowChoicesBe t1_jeabh0j wrote

If you want these utilization dings to go away, you’ve got to get more credit and not use it. A utilization of 50-90% is very high so it will be seen as risky. Ideally you want to stay under 10%. So you achieve this by getting your credit limit raised or opening more credit lines.

I usually put $1-2k on my main credit card per month, and my credit usage is below 5% because I have many cards, most with a zero balance.


ohmanilovethissong t1_jeaes4h wrote

If you have a better alternative to come up with credit scores I'm sure you could sell it for a lot of money.


ahj3939 t1_jear0h3 wrote

You need to keep balance low and ask for credit limit increase periodically.

You can also just pay off the balance early, Most banks only report your statement balance once a month.


CherishAlways t1_jeaukxc wrote

As I've grown older, wiser, and more wealthy, my credit score has gone to the bottom of my worry list. I had my identity stolen while in the military and had to deal with fraudulent accounts going to collection and screwing up my credit. I went through the process to clear it all up and everything was good again.

Now I'm 35 with a house and good job, I care much more about my retirement accounts, savings, etc., than my credit score. I got a notification that another fake account went to collections, taking my account down 100 points to low 700's. And I really don't care at this very moment. When I'm bored one day, I'll submit the paperwork to get it cleared out. But it doesn't matter much to me at this point in my life.

When I go to buy another house, I'll make sure it's all cleaned up. But my point is to not fret about the score too much. Build wealth instead.


AdChemical1663 t1_jebar0f wrote

Your utilization is sensitive because you’ve only got $700 in available credit.

In a few years, between limit increases, perhaps picking up a few more cards, you’ll have a much larger amount of credit available to you and your utilization will stay relatively low.

My monthly credit card bill is between $5k and $7k, but between the seven cards I have open, I’ve got about $80k of available credit. My utilization is much lower than yours, so my credit score is pretty stable.


p_rain08 t1_jebh7iv wrote

Because high utilization tells banks or lenders that you’re probably getting way over what you can pay with your income and should probably not lend you more money that you might not be able to pay.

The recommendation to use credit cards is mostly so if the card gets swipe with fraudulent transactions that they criminals didn’t spend your own money and therefore it’s much easier to dispute, much easier for them to close the account and then re-issue you a new number / card. And also there are rewards to take advantage off.

You should be using credit card like a debt card. Spend what you can pay / afford monthly and pay it off.


NorthOaklandGuy t1_jecinol wrote

Utilization has an extremely minimal impact on your score. I wouldn’t worry about it.


bury-me-in-books t1_jedpm92 wrote

Regarding your worry about qualifying for loans, you should be ok on that 700 or above range. When your score is there, they'll just be wanting to verify you've been employed for over a year or two at your current job, and that you're making enough to make the payments on whatever loan.


bury-me-in-books t1_jedpru1 wrote

Regarding help or advice, if you're worried about going over your 30% utilization ratio, you can pay onto the card ahead of time, but just don't carry a balance of extra money on your card. I have paid extra money on my card before in order to use it to pay something higher than the max limit of the card, so I know it will work.


Subject-Dog1386 t1_jedxryq wrote

I know this isn't the answer to your question but why not ask for a credit increase or/and get a second card and not use it then you wouldn't get close to the 30%.


Subject-Dog1386 t1_jedxyfs wrote

** you can ask for a credit increase through the cards app.


sundriedrainbow t1_je8mk9j wrote

$700 is a really low credit limit. For context, I (35m, also excellent credit) opened a card a few months ago and got a $23,000 limit out the gate.

You’re seeing this impact because of how low your limit it. Once you get it to $10k and higher you won’t be scraping it on every purchase.


forkintheroad_me t1_je8lzvd wrote

If you can afford to pay cash, why use your card for everything? Just put Netflix on it and it in autopay and just the rest cash. It will keep your credit utilization low, keep your credit active (and increase age of credit), and show you don't miss payments.

Your credit score is but your credit card. Credit cards don't organize you for anything but skipping payments. If it was too to then, they'd want you to max out an your cards, get more cards with them, and carry a balance so those blood suckers could profit off your debt.