For example, if I have a $250 credit line and spend it all in a month then repay it next month, will that raise my score?
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Credit utilization looks at the percentage of your total credit limit being used. The higher the percent, the worse your score with regard to that component of credit score. But as a component to your score, it has no memory month to month. If your limit is $250 and you buy something for $225 and that’s the balance on the day it gets reported to the credit bureaus, then the high utilization would hurt your score that month. But if you pay it off and have a $5 balance the next month, your score would reflect that low utilization percentage.
While there are guidelines to stay below a certain percentage utilization, don’t worry about those is you have a low limit because it’s not practical/feasible to stay under 30% of $250. Just focus on paying it off on time, building a track record and then ask for credit line increases, or apply for more cards to increase your total limit.
The only time the utilization makes a big difference is if you’re getting ready to apply for a major loan. Use the credit cards as a tool and worry about utilization when you’re getting ready to buy a car or house.
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