When does high balance affect credit score?

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Dear Credit Card Adviser,
I have several credit cards, and usually I keep the balances on them very low. From time to time, though, I make large purchases on one or two of them, sometimes right up to (but not over) the limit. The next month, I will pay them off in full. My question is: How quickly does this change in “utilization rate” affect my credit score, both on the “fill it up” side and on the “pay it off” side? If reporting is done once a month (when my statement cycles), is my score “bad” for one month, and then “good” the next month? Or, is reporting done more frequently (maybe daily?), so my score “gradually falls” for a while, and then “bounces back”? I really don’t know how frequently reporting is done.
— Steve

Dear Steve,
Your credit score represents a snapshot of your credit report at a particular moment in time. Charging up your credit cards on occasion can create a false, though temporary, picture of you as a riskier borrower to anyone checking your credit.

An increase in utilization, which is the proportion of available credit you’re using on revolving accounts, can have a negative impact on your credit rating. A maxed-out card can knock 25 to 45 points off a 780 FICO score, a credit score brand used by many lenders. That may not seem like a lot, but it can be if you’re on the edge of a score cutoff for loan approval or a low credit card interest rate.

How quickly would your score suffer and recover from a spiked utilization ratio? The short answer is as soon as the credit bureaus posted the new balances to your credit file. The next calculation of your credit score would reflect the new level of debt.

FICO scores “rarely” change on a daily basis, according to myFICO.com. Lenders typically report updates to the credit bureaus on a monthly basis.

Light use of credit cards is ideal in terms of the credit score and debt management, but if you must charge a large purchase, you can pay off or pay down the debt before the closing date of the next statement to protect your score from high utilization.

Keep in mind that your score can increase or decrease for other reasons besides utilization. Changes in your payment history, for example, can trigger an adjustment in score.

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