Explain 9% uti for optimal FICO

[Cdnewmanpac]

1. To be clear, the people recommending a utilization of 1-9% are NOT suggesting CARRYING a balance. They are talking about allowing a balance to post on your statement. Carrying a balance (while sometimes appropriate for an individual) does not boost your FICO score.

2. From a scoring standpoint, FICO typically penalizes you for having more than one card reporting a balance. 

3. While there is strong evidence that having a small balance reporting on one card leads to a higher score than having all cards report zero balance, this is mostly derived from reports from people with good to excellent credit. This may only apply to certain fico "buckets". Personally, I just had a new card report with a utilization >50% and my score didn't change. I then had another card accidentally report an $88 balance (on a 16k limit) and again, no change in score. I suspect this is because I have hit the max score allowed for my bucket (I have some charge-offs from 2006) and such minor factors as 0 vs 5% utilization are being overwhelmed by the larger penalty for serious delinquencies. However, when my score was closer to 650, I would notice a change of a few points when I allowed one card to report a balance of 8%. My only point with this is that nothing is certain in FICO scoring. 

4. Scoring from utilization doesn't carry forward. The only time utilization matters is when you are applying for credit. If you have no intention of applying for something this month, then stressing about zero vs nine vs five is a waste. While letting balances drift north of 80% may make your creditors nervous if they soft pull you, minor fluctuations in score don't matter most of the time.

[happyhome40]

The problem I have is, I have multiple cards that I use for different reasons (points,Cashback,etc) and the statement dates are all different. What is the best way to juggle multiple card use and optimize Fico score. I've noticed that since I'm using multiple cards to cover different things, and with different statement dates,a balance is always reporting on one card when the one due is reporting zero. Any ideas?

Monica

[jamie123]

The ONLY time you really need to do this is if you are applying for NEW credit in the next month or if you are interested in seeing how high you can tweek your scores.

It becomes a part time hobby and quite a lot of work and juggling to do this ALL the time.

Here is how you do it:

You designate one CC as your reporting CC that will report less than 9% of the grand total of all your CC credit lines. (Add all your CC credit lines together and muliply by .09, this will be the number you CANNOT exceed each month.)(Example: $1000 + $2000 + $300 + $700 = $4000 then $4000 X .09 = $360 )(In this example you CANNOT exceed $360 reporting on one CC)

Pay your ZERO balance cards off in full a day or two BEFORE each cards due date. After you make this payment you CANNOT use this card until it reports a zero balance to the CRAs. This will USUALLY occur within 4 days AFTER the due date.

When it comes time to pay your reporting card you do the same thing except you leave a balance that is less than 9% of overall CC credit lines. To prevent paying interest on this card you might want to make two payments per month on this card. Once it reports the less than 9% UTI, go back and pay the balance down to zero.

Some people are amazed at just how many points you can pick-up this way instead of having even minor small balances reporting on several cards. If your current reporting UTI  is above 10% and spread over 50% of your cards it will make a really big difference in your scores.

Hope this explanation was clear enough.

Any questions?

[Anonymous]

Due date? What due date? As in the day the statement closes right 

[cashnocredit]

A year or so ago I was transitioning between a thin file (2 CCs) with baddies and a larger clean one (4 CCs) . Throughout this I experimented with fine tuning EQ FICO optimization. What I found was consistent wiht what's reported here except that the highest FICO scores were when I had a balance reporting on a single card and that balance was between 1 and 4% of its CL. At 5% I saw a 3 point drop when I had old CAs reporting and a 5 point drop with a clean file.

These are pretty small changes but if I was going for a mortgage I would pull out all the stops and, to make sure my cards were active locs,  make sure I was reporting a balance at least every other month on all my cards and, just before apping, report a small ( <4% ) balance on a single CC.

[Anonymous]

Yes correct me if I'm wrong but...

First date is the due date when the month closes and your statement comes out.

After 4 days, the balance is reported to the CRAs?

Then after a week or so, your payment for that month is due. You do not want to pass this date without paying the full balance or else interest will consume you right?

[cashnocredit]

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@Anonymous wrote:

Due date? What due date? As in the day the statement closes right 

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The reason to pay just before the due date (Date payment is due is printed on your statement) is that it allows you to use the card till then and pay the current balance in full or leaving a small remaining balance for the one card you select while minimizing the time you shouldn't use the card before the next statement cuts a few days to a week later.

[cashnocredit]

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@Anonymous wrote:

Yes correct me if I'm wrong but...

First date is the due date when the month closes and your statement comes out.

After 4 days, the balance is reported to the CRAs?

Then after a week or so, your payment for that month is due. You do not want to pass this date without paying the full balance or else interest will consume you right?

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The goal is always to PIF so no interest accrues in any case. Additionaly, to tune your FICO, you want to prepay all but one of your CCs current balances which will reflect the additional amount you have charged beyond the prior statement's balance..

[jamie123]

Alright I'll explain a little more.

Payment Due Date: This is the date printed on the bottom of your statement informing you by which date you must make at least the minimum payment.

Reporting Date: This is when the creditor reports your payment and balance to the CRAs. This USUALLY happens 3 to 4 days AFTER the payment due date.

Statement Date: The day that a new statement is generated for the next month. This USUALLY happens 3 to 4 days AFTER  the payment due date and is USUALLY the same as the reporting date.

It kind of looks like this:

Payment Due Date August 10, 2012 >>>>>>>>>>>>>>3 to 4 days pass>>>>>>>>>>>>>>>>>>Reporting Date and Statement Date.

Then next month:

Payment Due Date September 10, 2012 >>>>>>>>>>>3 to 4 days pass>>>>>>>>>>>>>>>>>>Reporting Date and Statement Date.

[Anonymous]

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@jamie123 wrote:

The ONLY time you really need to do this is if you are applying for NEW credit in the next month or if you are interested in seeing how high you can tweek your scores.

It becomes a part time hobby and quite a lot of work and juggling to do this ALL the time.

Here is how you do it:

You designate one CC as your reporting CC that will report less than 9% of the grand total of all your CC credit lines. (Add all your CC credit lines together and muliply by .09, this will be the number you CANNOT exceed each month.)(Example: $1000 + $2000 + $300 + $700 = $4000 then $4000 X .09 = $360 )(In this example you CANNOT exceed $360 reporting on one CC)

Pay your ZERO balance cards off in full a day or two BEFORE each cards due date. After you make this payment you CANNOT use this card until it reports a zero balance to the CRAs. This will USUALLY occur within 4 days AFTER the due date.

When it comes time to pay your reporting card you do the same thing except you leave a balance that is less than 9% of overall CC credit lines. To prevent paying interest on this card you might want to make two payments per month on this card. Once it reports the less than 9% UTI, go back and pay the balance down to zero.

Some people are amazed at just how many points you can pick-up this way instead of having even minor small balances reporting on several cards. If your current reporting UTI  is above 10% and spread over 50% of your cards it will make a really big difference in your scores.

Hope this explanation was clear enough.

Any questions?

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very useful informatin.

One question, can we keep reporting balance of 9% of highest limit cc? I am just afraid of keeping 360 balance on lowest limit card, e.g cc with 700. This will report 50% utilization on 700 cc. Rather i would like to keep balance of 180 on cc with limit 2000. Whats ur thougts?