The all zero except one (AZEO) method is an advanced credit utilization technique that focuses on having all revolving credit accounts report a zero balance, except for one account that reports a small balance.
Since creditors like to see responsible credit usage, the AZEO technique might provide the ultimate approach for revolving credit.
Some people have been able to squeeze out a few additional points right before major credit applications, such as a mortgage, to secure the most favorable terms.
What should my credit utilization ratio be?
People with the most success from the AZEO approach use one revolving credit account to report a balance over $2 but under a 9% total credit utilization ratio.
Some aim for a 1% to 9% usage rate, while others have success with a minuscule balance of less than 1%, such as $3 to $10.
There is some evidence that $2 can be ignored for reporting purposes, showing up as a zero balance and failing to get any potential AZEO benefit.
Others have noticed that the balance must be on a national bank card, not a retailer one.
Credit card utilization makes up about one-third of your total credit calculation. The AZEO method requires mostly zero balances across all revolving credit, including personal lines of credit and credit cards across all lenders.
By choosing to add a small balance to one account, some people have seen a small increase in their credit score in the short term.
The total number of open accounts doesn’t seem to matter, as long as only one account reports a small balance.
It’s important, in order to achieve this, that you avoid having too many accounts with balances, as this can have the opposite effect.
Does 0% utilization harm credit?
Having a 0% utilization rate doesn’t necessarily harm your credit.
But if you let any account become flagged as inactive, it may be excluded from your credit calculation.
This reduces your number of open accounts and total available credit, both unfavorable.
Additionally, some lenders close accounts automatically when inactive for extended periods.
Any time you close an account, intentionally or not, your credit score may suffer due to decreased credit history, number of accounts, and total credit available.
To avoid these problems and adhere to the AZEO technique, use all of your cards for small, infrequent purchases and pay them off right away.
Will 50% outstanding credit balance hurt me?
Having 50% or more of your total credit limit in use will likely damage your credit score. Credit agencies and lenders use this against you because of:
- Increased risk of failure to repay debt
- Additional concerns about interest rate hikes
- Elevated likelihood of exceeding credit limits
In the past, 50% usage was the generally-accepted limit. But things have changed. The new rule most people use is less than a 30% utilization rate for revolving credit.
To use AZEO to its fullest potential, aim much lower at around 9% maximum.
How are revolving account balances reported?
Most card issuers report the statement balance and possibly the current balance once per month to the credit bureaus. To adhere to AZEO, pay off the balance on all accounts except one before these dates.
You can still use all your credit cards to get rewards, discounts, and benefits. As long as you pay them off on time, you can still have a zero reported balance.
What are the relevant credit card dates?
Using AZEO depends on your understanding of critical credit card dates, including:
- Statement closing date: Issuers report the balance as of this date to credit agencies. It’s also used to calculate potential interest charges.
- Reporting date: The day card issuers report the statement balance, and in some cases, the current balance to credit agencies. This is often identical to the statement date, but can be shortly after or a completely different date depending on the issuer’s policy.
- Payment due date: A minimum payment must be made by the due date to stay in good standing and avoid fees or penalties. To avoid interest charges entirely, the entire statement balance must be paid in full by this date.
When are my statement and reporting dates?
Contacting each card issuer directly is the best way to find out your statement and reporting dates.
You can also find the statement date on your monthly statements, while reporting dates are commonly listed on third-party credit monitoring services or your credit reports.
Many card issuers allow customers to adjust their billing cycle and statement dates. This is useful for AZEO management and general financial management.
For example, scheduling your payday to land shortly before the statement date makes it easier to pay off the entire balance, hitting zero reported balance and ensuring you avoid interest charges.
Tips for lowering credit card balances
These tips can achieve lower credit utilization rates and increase your chances of using AZEO beneficially:
- Request higher limits: By increasing your available credit, your utilization ratio decreases.
- Track charges and reporting dates: Stay vigilant about when you use cards and pay them off to ensure they report a zero balance. Avoid purchases too close to important dates since pending charges are tough to plan around.
- Open a new card: If you are focused on a long-term solution and not going for the short-term AZEO benefits, a new account can lower your total usage rate. But it usually causes a short-term drop in your score due to the hard credit inquiry, often outweighing any immediate AZEO increase.
- Limit card purchases: It’s common to struggle with credit card debt, making it difficult to reach the point where AZEO is possible. To conquer this, avoid using cards or only use them to receive specific benefits, then pay off the full amount right away.