What Unconventional Credit Utilization Advice Has Proven Effective?


    What Unconventional Credit Utilization Advice Has Proven Effective?

    When it comes to credit utilization, a Co-founder & CEO kicks off our unconventional advice list by recommending the use of credit solely for recurring bills. Alongside their insight, we've gathered additional tips, from staying well below the recommended utilization to taking advantage of low limit cards, that offer a fresh take on managing your credit health.

    • Use Credit for Necessary Recurring Expenses
    • Stay Below 10% Utilization
    • Split Monthly Payments
    • Periodically Request Higher Credit Limits
    • Use Low Limit Cards for Small Purchases

    Use Credit for Necessary Recurring Expenses

    As a tech CEO responsible for comprehensive operations, I've advised people to consider using their credit solely for necessary recurring expenses—like utility bills, which they'd pay anyway. This strategy seems unconventional, but it ensures they keep their credit active without the risk of overspending, while keeping credit utilization low. The trick is to pay off the balance on time, every time. It's like putting your credit utilization on autopilot, keeping everything clean and tidy and boosting your credit health. It's an unusual strategy, but effective when followed strictly.

    Abid Salahi
    Abid SalahiCo-founder & CEO, FinlyWealth

    Stay Below 10% Utilization

    Keeping credit card utilization under 10% is a tactic some have adopted to improve their credit scores significantly. It shows lenders that you are not overly reliant on credit and can manage your finances effectively. Staying well below the recommended 30% utilization shows discipline and can positively influence your creditworthiness.

    This method ensures that when credit agencies calculate your score, they see a responsible credit user. Begin monitoring your credit card usage more closely to stay under this threshold.

    Split Monthly Payments

    Another strategy involves splitting monthly payments into two. Instead of paying the full amount once a month, paying half early and the rest later can reduce the balance that's reported to credit bureaus at statement time. This method can lead to lower average monthly balances, which affects utilization ratios and can improve a credit score.

    Since most credit card companies report balances to credit bureaus once a month, this approach can help create the appearance of a lower credit utilization. Try organizing your budget to make two payments monthly and observe the potential impact on your credit utilization.

    Periodically Request Higher Credit Limits

    Some individuals have found that asking for higher credit limits on their current accounts can help improve their overall credit utilization ratio, as long as they do not increase their actual spending. By keeping spending habits consistent while increasing available credit, one essentially lowers their percentage of credit in use. This serves as a positive signal to credit agencies that one is using a smaller portion of their available credit.

    This method can be particularly effective in raising one's credit score over time. If you have a good payment history, consider requesting a credit limit increase with your current credit card issuer.

    Use Low Limit Cards for Small Purchases

    Using credit cards with low credit limits for frequent, small purchases can also be beneficial. This approach allows for easier management of small, regular payments, which can lead to high payment frequency and demonstrates consistent, reliable usage. The continuous activity on these cards, paired with timely repayments, showcases one's ability to handle credit effectively.

    This can be especially useful for individuals aiming to establish or rebuild their credit. Start using a smaller credit card for your daily expenses to maintain control and improve your credit standing.