Improving a great credit score comes down to timing

Dear Credit Score Report,I have question about my FICO score (currently 768) and, in particular, how my "credit card utilization" is part of the score. My wife and I have three credit cards: a Chase Visa with a $45,000 limit, a Citibank MasterCard with a $10,000 limit and an American Express card. We use the MasterCard and American Express very little -- maybe $25-$50 per month combined. We use the Visa a lot, with charges of $7,000-$15,000 per month and highs of $30,000-$40,000 in a few months each year. The majority of charges are business-related and reimbursed immediately by my wife's company. We always pay the balance in full each month. I noticed on another Web site ( that my credit card utilization rate is graded as a "D", which I think, is bringing down my score. Please advise as to how to rectify this situation and bring my FICO score up. Thank you in advance. -- Salomon

Hey Salomon,Your credit score of 768 suggests you are doing a lot of things right, including regularly paying your credit card bills in full. However, when it comes to your utilization ratio -- the total amount of debt you carry compared to your total available credit -- you appear to be a victim of bad timing.

Here's how: Credit card issuers send your account data to the credit bureaus, which in turn, apply credit scoring formulas to that data. When you request to see your credit score, the number you get reflects a snapshot of your credit report based on the most updated information in the credit bureau's records. That means the score that gets calculated is only as good as the most recent data that goes into it. Different credit card issuers report cardholder account information at different times -- some report each month, some once a quarter, others at other intervals. Therefore, depending on when you request it, your credit report might still include a $30,000 account balance, even if you have since paid that debt off. 

"Paying off credit card balances in full every month is an excellent credit habit, but doesn't mean that one's lender will report a zero balance to the credit bureaus," says Craig Watts, spokesman for FICO, the company whose credit scoring model bears its name.

That seems to be what's happening to you. According to Steve Katz, spokesman for credit bureau TransUnion, banks generally report a cardholder's account information to the bureaus about once every 30 days, but it can really vary. For example, Chase says it reports the current card balance on the 13th or 14th of every month. Citi, American Express and Wells Fargo each say it reports the account balances listed on cardholders' monthly statements. Bank of America says it reports account balances 30 to 45 days after payment is received.

These are self-imposed reporting deadlines for these issuers, and when the bureaus actually report can fluctuate for any number of reasons. Still, that timing can make a difference to your credit score. Here's an example of how this might work:

  • Say you have a balance of $30,000 on your Chase card on Dec. 13 or 14. (You've had only tiny balances on your other two cards for the past few months.)
  • According to Chase policy, that balance is reported to the credit bureaus.
  • You pay it off in full on Dec. 16.
  • You apply for a loan on Dec. 22.
  • The credit report that the lender sees will likely not show your balance as paid in full because the most recent information about that account was pulled on Dec. 13 or 14, when your balance was huge. That leaves you with a high utilization ratio.

"A high utilization rate is an indicator of risk, so it can have a negative impact on credit scores," says Rod Griffin, director of public education for credit bureau Experian. And since lenders use credit scores to decide whether to let consumers borrow money -- and at what interest rate -- a higher ratio can cost you real money.

How much money? That's hard to say, but a recent announcement from FICO said that a hypothetical person with a 780 credit score -- a bit higher than yours, but close enough -- could see their score plummet by 25 to 45 points for maxing out a credit card. A 45-point drop would still leave you with a very good score of 723, but it would leave you just one small mistake away from a credit score in the 600s. That drop could cost you hundreds each year the next time you apply for a car loan or a mortgage. It could even lead an issuer to reject your next credit card application. (For more details, check out our story about FICO's "damage points.")

As for the credit score you saw, Credit Karma provides TransUnion TransRisk scores. While that's a different scoring model than the more widely used FICO score, they do share similarities, including a scoring range of 300 to 850. With your credit score of 768, you should already qualify for the best rates from lenders. While that's obviously a good thing, it does mean that it'll be harder to raise your credit score since it's already very high. In Credit Karma's grading system, you probably had excellent scores in other categories, even though you had a poor grade for credit utilization.

But if you are still concerned about improving your credit utilization and FICO score, consider the following steps: 

  • Make credit card payments more than once a month. By making card payments two or more times during a billing cycle, rather than just at month's end, you can keep your average balances lower and improve your utilization ratio. Credit Karma's chief executive and founder Ken Lin says that because a sudden change in payment behavior could raise fraud concerns at your bank, you should alert them ahead of time about your plans.
  • Spread your spending among several cards. While there may be a good reason for primarily using one of your credit cards -- such as keeping business expenses separate, earning rewards or airline miles, etc. -- consider spreading your charges across all your plastic. That way, if one account's terms get worse or the account suddenly gets closed, you will still have open and active accounts and lines of credit to use.
  • Request a higher credit limit. Consider calling your bank and asking them to increase your credit limit. But be warned: With lots of banks cutting limits and closing accounts, it's a tough time to get more credit. Some experts discourage consumers from contacting their bank right now unless absolutely necessary, since it can trigger an account review and leave you with worse terms.

If you follow these tips -- and continue paying your debt on time and in full every month, as you have been -- you'll continue to have a high credit score.

Good luck!

More from