Please Explain to me Ultization and AAoA

[JMills]

My current utilization is 39.6, thanks. I created a formula, to keep myself to track with these figures

[JMills]

32.61 I just did again, not bad!

[jenn_bar]

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@armbenderc wrote:

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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.

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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

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.

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I would also suggest paying your balance multiple times a month--especialy starting up. This nearly jumped my credit up 50 points within a few months once I started doing this. It is also what you must do in order to keep your utilization down if you have a small credit limit.

For example, my first card was a Chase Freedom for $2.5k. Putting all my expenses on that monthly, I would nearly reach the top. After reading that tip, I paid in full whatever balance was showing online every 4-5 days. That way, most of the time, Chase would report my balance at ~$50/month. With a $2.5k limit, thats nearly 2% utilization. From this history, I've been given 15k CL in just Chase credit cards alone.

[longtimelurker]

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@jenn_bar wrote:

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@armbenderc wrote:

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@CS800 wrote:

---

@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?

---

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

Pay on time,

Pay before statement cut,

Pay in full.

---

I would also suggest paying your balance multiple times a month--especialy starting up. This nearly jumped my credit up 50 points within a few months once I started doing this. It is also what you must do in order to keep your utilization down if you have a small credit limit.

For example, my first card was a Chase Freedom for $2.5k. Putting all my expenses on that monthly, I would nearly reach the top. After reading that tip, I paid in full whatever balance was showing online every 4-5 days. That way, most of the time, Chase would report my balance at ~$50/month. With a $2.5k limit, thats nearly 2% utilization. From this history, I've been given 15k CL in just Chase credit cards alone.

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The important thing is that the balance when reported is as low as possible, it doesn't matter whether you achieve this in one payment or multiple.  But, as in your experience, it may be necessary to do this if the CL is very small.   But your credit score should be the same, however you reach the reported balance.

[HYPASS33]

Get it down to 1-9% and see the difference in your score. I think seeing the difference will make you strive every month to keep it as low as possible.

[guiness56]

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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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Your AAoA is based on ALL OC accounts, open, closed, good or bad.

To find the average, go by months.  Add up all the accounts in months from the date opened to the date closed, if it is closed.  If they are still open, from the date opened to the current month.  When all are added, divide by the number of accounts and convert back to years.

And I believe FICO rounds down.

[Revelate]

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@guiness56 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.

---

Your AAoA is based on ALL OC accounts, open, closed, good or bad.

To find the average, go by months.  Add up all the accounts in months from the date opened to the date closed, if it is closed.  If they are still open, from the date opened to the current month.  When all are added, divide by the number of accounts and convert back to years.

And I believe FICO rounds down.

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For AAoA FICO does round down to the year, with a minimum of one year regardless of AAoA calculation.   I'm getting nice an comfy at my one year mark, which I won't get out of until I turn two.  

Think that's going to be worth getting into a good bottle of scotch over .

[leegreen]

Reviving a thread from last year...

As far as AAoA goes does anybody know what the levels are? I see it seems to only help you for each year. Where are the big gains or do they just jump by approximately the same amount each full year? For instance my AAoA was over 4 years... then I went on a credit spree to reduce my overall interest rates and gain CC's and CLI's to help my overall utilization... I am now less than 3 years, do I get as good of a score gain when I pass 3 again as I will get when I pass 4?