Credit Utilization Percentages

[CreditPhoenix]

Hi All,

I just got a second credit card for no good reason, a Citi Double Cash.  (Although, I do look forward to 2% on all purchases.)  I have a 770 score and want to get up to the 800's.  Even though I pay every single bill in full and on time every month, I appear to carry a balance of $800 to $1K (credit limit is $7K on the card).  So I just got a second card in the $7K range.  I'm now up to $15K in cards.  

Question:  How much credit limit do I need until $1K or less is seen as the lowest and most positive utilization level?  In other words, should I get a third card, taking my limit up to $22K?  (I don't want this many cards in my wallet.)  What's the percentage they're after?  5%?

Also, any update on when FICO might be getting "paid in full" data?  I can't wait for that as I believe people who pay all bills in full should have the highest scores, period.  If I'm lending and I see someone who always pays all bills on time and in full, I'd consider them the most likely to pay me back.  I'd give them the highest FICO.  But that's not the world we live in.  Is it coming any time soon?

[creditguy]

I understand a minimum of three credit cards would be your best option for maximux scoring potential. As far as utilization goes, as long as you keep it under 10% you should be perfectly fine, of course keeping it lower is fine too. Just remeber to keep something reporting for utilization and you should be good. The other thing you have to remeber is mix of credit use when calculating scores, Do you have any installment loans on your CR? 

[CreditPhoenix]

Hi Credit Guy,

I have a mortgage.  I own my car in full.  So, it's only mortgage and credit cards.  

I have my BofA card giving me 2% on Groceries and 3% on Gas, and then an additional 25% bonus on the reward if I apply it to my checking account.  I just got the Citi Double Cash for all non-Groceries and non-Gas.  Now I'm thinking that I should get the AARP Chase card which gives 3% on restaurants.  Is there anything else better for restaurants without an annual fee?  Can I get the AARP even if I'm below 50 and don't have an AARP number?

Also, does anyone else have an update on "Paid In Full"?  I really hope this industry factors that in soon, along with utilities.  It feels absurd and less safe to have my credit extended into two extra directions, unnecessarily, in order to make me look more "credit worthy"!?!  Absurd.  But I guess I don't mind getting all the cash back that I can.  

[creditguy]

You might want to go for the AARP just to round out the three card category plus it seems to fit your needs, your more than qualified for it so I don't see any reason not to go for it. I know the sam's club MasterCard also offers 3% cashback on restaurants but other than that I know of no others off the top of my head.  Don't worry about age for the AARP card that is not a requirement. 

[OmarGB9]

Scoring wise, the "rule of thumb" per se is to keep all cards at $0 balance (meaning PIF BEFORE statement cut) and just let ONE card report a balance, and that balance should be between 1-9%. The "sweet spot" for UTIL reporting varies by credit profile, so while 5% may work for you, 3% might work for someone else (just throwing out random examples). You have to play with your profile and see what gives you the results you want.

As far as when FICO (I guess you mean the CRAs?) gets your PIF data, they won't necessarily get that until next statement, unless, as I stated above, you PIF prior to statement cut. The bureaus get your updated balances upon statement cut, then it takes a couple of days for it to reflect in their systems/on your reports.

[Aahz]

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@CreditPhoenix wrote:

Also, does anyone else have an update on "Paid In Full"?  I really hope this industry factors that in soon, along with utilities.  

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Despite what one prolific poster constantly states here in the forums, I have found no actual reports that FICO is considering factoring "Paid In Full" accounts into any future models.

It took the current model (FICO 8 - introduced in 2009) more than two full years to be adopted by most credit card companies.

FICO 9 was just released late last year (six years after FICO 8), so figure it will be in widespread use around 2018.

So, Should FICO 10 will probably be released around 2019 or 2020 and be widely adopted around 2022.  But, again, I've seen no actual FICO whitepapers or news articles implying it will incorporate "Paid In Full" as a plus for scores.

In other words, I wouldn't hold my breath.

ETA: Oh, and utilities aren't credit so don't really fit into FICO scoring.

[takeshi74]

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@CreditPhoenix wrote:

Even though I pay every single bill in full and on time every month, I appear to carry a balance of $800 to $1K (credit limit is $7K on the card).

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Carry and report are two entirely different things.  You can pay in full, not carry and have a balance report.  If you want to avoid having a balance report then you need to pay in full prior to report date, not the due date.  Payments after the report date will not impact the reported balance.

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@CreditPhoenix wrote:

How much credit limit do I need until $1K or less is seen as the lowest and most positive utilization level?

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Probably 1% but you'd need to test at different revolving utilization levels to see if there's a meaningful difference between X% and Y%.  Generally, the smaller the change the smaller the impact.

Again, you can pay prior to report date to reduce revolving utilization.  You don't have to rely on higher limits.

My spend and limits fall at about 6%, I have 8 of 12 cards reporting balances and my FICO 8's are all above 800.  You don't have to have the lowest possible revolving utilization for high scores.

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@CreditPhoenix wrote:

Also, any update on when FICO might be getting "paid in full" data?  I can't wait for that as I believe people who pay all bills in full should have the highest scores, period.  If I'm lending and I see someone who always pays all bills on time and in full, I'd consider them the most likely to pay me back.  I'd give them the highest FICO.  But that's not the world we live in.  Is it coming any time soon?

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I'm not aware of any such changes.  It's not about how you see things but how FICO and creditors see things.  If you want to see change then work with the system versus waiting on it to change to fit what you expect.  As stated above, even if a new model with such changes was released today it would take time for creditors to adopt the new model and not all would do so.

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@CreditPhoenix wrote:

Can I get the AARP even if I'm below 50 and don't have an AARP number?

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Sure but is 3% on restaurant spend significant compared to what you're currently getting in dollars?  Always run the numbers for your spend.

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@CreditPhoenix wrote:

It feels absurd and less safe to have my credit extended into two extra directions, unnecessarily, in order to make me look more "credit worthy"!?!  Absurd.  But I guess I don't mind getting all the cash back that I can.  

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You don't have to.  You're choosing to.  At 770 (assuming the score is a FICO 8) you're already above the mark for qualifying for best terms so anything higher is just gravy.

Step back and reconsider.  What specific issues are you experiencing because of your credit profile and scores where you would benefit from a better report and higher scores?  There's nothing wrong with wanting the highest scores possible but it's absurd to say that it's absurd that the system is forcing you to do this.  While I'm over 800 I'm nowhere near 850 but I'm not losing sleep over it.  The hassle isn't worth it to me.

[redpat]

Always remember that utilization no memory.  

If you aren't looking for credit it's a moot point to window dress a score every month, only maybe to make yourself feel better, lol.

Up five, down 10, up 15, down 8 on a month to month basis with high score really doesn't matter much.  It's more important to pay bills and pay no interest.

So let those statements cut........PIF before due date!

As the Kinks would say "Paranoia will destroy ya."

[Anonymous]

I PIF before the due date (NOT the statement date), so I report a balance on every card every month. At this point, a fluctuation of a percent or two of utilization is only going to have about 5 points of effect on my report. I don't really find it useful to play the "all but one at 0%" game, as the gains from it are somewhat minimal and I'm not apping for anything at the moment.

If you're having $1k report, your ideal is probably to have somewhere around $30k in available credit. However, this isn't the be all/end all, and you'll be fine with the credit that you have. Instead, only consider cards that you think will help you out. For example, there is no age limit on the AARP card. I recieved mine when I was in my 20s, and it provides an extra 1% back over my Double Cash for restaurant purchases, so it was worth it for me (and might be for you). Similarly, a gas card could be helpful, or a quarterly 5% card. You just have to look at your spend and your portfolio and determine what you think is worth it to add.

[Thomas_Thumb]

Agree - PIF by due date is key.

I am not an advocate of pre-pay before statement cuts. It can be a hasstle and you lose interest free float time on your charges.

Nonetheless, depending on spending and CLs, prepay may be the best approach for some to maintain a relatively low utilization. Once the transactor/revolver designator comes into play as a segmentation criteria, value of prepay for transactors may become moot - as long as monthly charges don't exceed the card's CL>