Please Explain to me Ultization and AAoA

[JMills]

I'm still learning and I'm still need some information on utilization and AAOa, is it good to have high credit limits on all your cards? If I have low limits, will that affect me in the long run, when apping for new cards? What will you suggest I do? In rebuilding stage. My longest card is 7 years, explain the whole AAoA process please, so I can do this right.

[myjourney]

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@JMills wrote:
I'm still learning and I'm still need some information on utilization and AAOa, is it good to have high credit limits on all your cards? It helps to have high limit cards for UTL purposes but not mandatory you can still achieve the same goals with smaller limits

If I have low limits, will that affect me in the long run, when apping for new cards? While banks like to sometimes match other lenders to gain your business at some point in your credit history someone will give you a higher limit based on your CR, scores and credit history.

What will you suggest I do? Continue building a positive history with the cards you have keeping them at 1-9% UTL for 6-12 months and app the next level up of the card of your choice (after researching the requirements needed to obtain that card)

In rebuilding stage. My longest card is 7 years, explain the whole AAoA process please, so I can do this right. Each month / year w/o any new apps for credit your AAoA increases by a month ....Example if you don't appy for any credit for 1 year your AAoA increases by  12 months /1 year. If you apply for cards your AAoA then is decreased. If you search AAoA on the boards there's a formula that will explain further

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[CS800]

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@JMills wrote:
I'm still learning and I'm still need some information on utilization and AAOa, is it good to have high credit limits on all your cards? If I have low limits, will that affect me in the long run, when apping for new cards? What will you suggest I do? In rebuilding stage. My longest card is 7 years, explain the whole AAoA process please, so I can do this right.

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AAoA:

The average age of all your accounts as the acronym states. Take the age of all your accounts and divide them by the number of account = AAoA

Example:

Account 1 : 2 yrs

Account 2: 4 yrs

Account 3: 6 yrs

AAoA = (2+4+6)/3 = 4 yrs

The higher the AAoA, the better it is. If it's a decimal, FICO will most likely take the lowest round number.

Util:

- Take all your credit limits and add them

- Add all the credit that you are using from your cards

- Take the total amount of $$ used divide by the total credit limit X 100 gives you util %

The lower the util, the better. Generally from what I have read and understood, to keep util below 10% (YMMV)

Example:

Card 1: CL 1000, using 100

Card 2: CL 2000, using 200

Card 3: CL 3000, using 300

Util % = [(100+200+300) / (1000+2000+3000) ] X 100 = 10%

Low limits will affect your util % if you're using a lot of the available credit limit. If you pay them in full before the statement cuts, it will not affect your util.

The key to improve credit is:

- Pay everything on time

- Don't app for anythnig unless you need it (this will create hard inqs as well as may lower your AAoA significantly; unless you can have an AMEX backdated)

- Let your accounts age

- Don't let your cards report with high util

- Did I say pay everything on time?

[armbenderc]

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@CS800 wrote:

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@JMills wrote:
I'm still learning and I'm still need some information on utilization and AAOa, is it good to have high credit limits on all your cards? If I have low limits, will that affect me in the long run, when apping for new cards? What will you suggest I do? In rebuilding stage. My longest card is 7 years, explain the whole AAoA process please, so I can do this right.

---

AAoA:

The average age of all your accounts as the acronym states. Take the age of all your accounts and divide them by the number of account = AAoA

The higher the AAoA, the better it is

Util:

- Take all your credit limits and add them

- Add all the credit that you are using from your cards

- Take the total amount of $$ used divide by the total credit limit X 100 gives you util %

The lower the util, the better. Generally from what I have read and understood, to keep util below 10% (YMMV)

Low limits will affect your util % if you're using a lot of the available credit limit. If you pay them in full before the statement cuts, it will not affect your util.

The key to improve credit is:

- Pay everything on time

- Don't app for anythnig unless you need it (this will create hard inqs as well as may lower your AAoA significantly; unless you can have an AMEX backdated)

- Let your accounts age

- Don't let your cards report with high util

- Did I say pay everything on time?

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Well said, someone on here also said to remember the 3 Ps

Pay on time,

Pay before statement cut,

Pay in full.

[oscar_actuary]

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@myjourney wrote:

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@JMills wrote:
In rebuilding stage. My longest card is 7 years, explain the whole AAoA process please, so I can do this right. Each month / year w/o any new apps for credit your AAoA increases by a month ....Example if you don't appy for any credit for 1 year your AAoA increases by  12 months /1 year. If you apply for cards your AAoA then is decreased. If you search AAoA on the boards there's a formula that will explain further

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Are you saying AAoA is impacted by just apping, even if you are denied?

I can see it making sense either way but I was not thinking that way.

[myjourney]

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@oscar_actuary wrote:

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@myjourney wrote:

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@JMills wrote:
In rebuilding stage. My longest card is 7 years, explain the whole AAoA process please, so I can do this right. Each month / year w/o any new apps for credit your AAoA increases by a month ....Example if you don't appy for any credit for 1 year your AAoA increases by  12 months /1 year. If you apply for cards your AAoA then is decreased. If you search AAoA on the boards there's a formula that will explain further

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Are you saying AAoA is impacted by just apping, even if you are denied?

I can see it making sense either way but I was not thinking that way.

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No only approvals INQ's do not effect AAoA

[JMills]

Omg thank you, its more clear now. What is better A good utilization or good AAoA? Or should I strive for both

[myjourney]

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@JMills wrote:
Omg thank you, its more clear now. What is better A good utilization or good AAoA? Or should I strive for both

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Both

[JMills]

MY AAoA is average is 8 years. I need to work bringing down my utilization rate

[longtimelurker]

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@JMills wrote:
MY AAoA is average is 8 years. I need to work bringing down my utilization rate

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8 years is pretty good, most here have shorter AAoA.   Obviously depends on circumstances, but in general utilization is "easier" to fix as there is no history, once you reduce the balance showing on card(s) that month, the utilization is immediately lower, never mind what happened in the past. AAoA is only increased over time, and by not getting new cards (except Amex) and Amex backdating..