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Raising credit scores

Frequent Contributor

Raising credit scores

 
I was reading an article from rismedia.com (www.rismedia.com, dated July 18, 2007 which states "make sure your maximum limit is reported," says Jamison (a Los Angeles-based credit attorney).  "When no limit is reported, credit scoring software presumes the account is "maxed out".  The credit scoring software scores more favorably the closer a balance is to zero.  Balances over 70% damage credit the most, followed by the next tier of 50% and again by the tier of 30% of the maximum credit limit."
 
My question is, is it alright to use up to 70% of one's credit limit without being seriously damaged?  I have been told that using up to 70% on just one card won't seriously impair your credit.  Is this true?  
 
 
SandyK
Message 1 of 11
10 REPLIES
Moderator Emeritus

Re: Raising credit scores

Last month I hit 27% in utilization and FICO red-flagged me for having to high of an util%. Ideally, you should have balances report less than 10% across each revolving credit card. Anything over 10% will result in a score hit. Also, you should have half of your cards report a $0 balance, but not all cards shoudl report $0, as this could cause a hit too.
 
70% is way too high!


Message Edited by llecs on 03-11-2008 03:35 PM
Message 2 of 11
Moderator Emeritus

Re: Raising credit scores



sankofa wrote:
 
I was reading an article from rismedia.com (www.rismedia.com, dated July 18, 2007 which states "make sure your maximum limit is reported," says Jamison (a Los Angeles-based credit attorney).  "When no limit is reported, credit scoring software presumes the account is "maxed out".  The credit scoring software scores more favorably the closer a balance is to zero.  Balances over 70% damage credit the most, followed by the next tier of 50% and again by the tier of 30% of the maximum credit limit."
 
My question is, is it alright to use up to 70% of one's credit limit without being seriously damaged?  I have been told that using up to 70% on just one card won't seriously impair your credit.  Is this true?  
 
 
SandyK


Sandy,
 
Would you mind editing your message to include a link directly to the article you mention?  I went to the site you linked to, but there are so many links on the front page, I couldn't find the article you were quoting.
 
There is one item in the quote that is not quite accurate.  If no limit is reported, FICO does not automatically treat it as maxed out.  Instead, it will use the value in the High Balance (or High Credit) field as a susbstitution for the credit limit.  This means that the credit limit will be assumed to be the highest balance that was ever on the card.
 
If, for example, you have a card with a $10K unreported limit, which at one time in the past had a $5K balance and currently has a $1K balance, FICO will not see it as maxed out, but will see it as 20% utilization.  ($1K current balance / $5K high balance = 20%)
 
To answer your question, no, it is not OK to use up to 70% of the limit.  You will get dinged for anything over 9%, with major damage when you cross 50%.  Utilization of 70% is viewed as seriously high utilization, and your score will suffer for it.
 


Message Edited by cheddar on 03-11-2008 03:43 PM
----------------------------
App free since 7/11/08.
TU 744 / EX 710 / EQ 694 (Starting to slip. Smiley Surprised )
Message 3 of 11
Frequent Contributor

Re: Raising credit scores

llecs,
 
Thanks for your input.  I have found it hard in the past to stay at 1-9% utilization on my credit cards without having a whole lot of credit cards to distribute my balances to.  The hardest time for me is when we have to make a large purchase. 
 
27% utilization seems ideal, but if you are getting flagged by FICO then it isn't good I guess. 
 
SandyK
Message 4 of 11
Frequent Contributor

Re: Raising credit scores



cheddar wrote:


sankofa wrote:
 
I was reading an article from rismedia.com (www.rismedia.com, dated July 18, 2007 which states "make sure your maximum limit is reported," says Jamison (a Los Angeles-based credit attorney).  "When no limit is reported, credit scoring software presumes the account is "maxed out".  The credit scoring software scores more favorably the closer a balance is to zero.  Balances over 70% damage credit the most, followed by the next tier of 50% and again by the tier of 30% of the maximum credit limit."
 
My question is, is it alright to use up to 70% of one's credit limit without being seriously damaged?  I have been told that using up to 70% on just one card won't seriously impair your credit.  Is this true?  
 
 
SandyK


Sandy,
 
Would you mind editing your message to include a link directly to the article you mention?  I went to the site you linked to, but there are so many links on the front page, I couldn't find the article you were quoting.
 
There is one item in the quote that is not quite accurate.  If no limit is reported, FICO does not automatically treat it as maxed out.  Instead, it will use the value in the High Balance (or High Credit) field as a susbstitution for the credit limit.  This means that the credit limit will be assumed to be the highest balance that was ever on the card.
 
If, for example, you have a card with a $10K unreported limit, which at one time in the past had a $5K balance and currently has a $1K balance, FICO will not see it as maxed out, but will see it as 20% utilization.  ($1K current balance / $5K high balance = 20%)
 
To answer your question, no, it is not OK to use up to 70% of the limit.  You will get dinged for anything over 9%, with major damage when you cross 50%.  Utilization of 70% is viewed as seriously high utilization, and your score will suffer for it.
 


Message Edited by cheddar on 03-11-2008 03:43 PM

Cheddar,
Ooops sorry this is the complete article!
 
SandyK
Message 5 of 11
Moderator Emeritus

Re: Raising credit scores

Thanks for the link to the full article.
 
Aside from the minor point I mentioned above about how FICO treats CLs that don't report, I think this is a pretty good article.  I was kind of surprised to see that the author even discusses GW and PFDs.
 
Sandy, if you find that you are using around 27% of your limits and are letting that amount of utilization report, you might want to consider trying to get some CLIs on your existing cards so that your reported utilization wil lbe lower.  Otherwise, you can try playing the "pay before statement date" game that a lot of us here play in order to control the balances that the CCs report.
 


Message Edited by cheddar on 03-11-2008 04:03 PM
----------------------------
App free since 7/11/08.
TU 744 / EX 710 / EQ 694 (Starting to slip. Smiley Surprised )
Message 6 of 11
Moderator Emeritus

Re: Raising credit scores

Whoops.  One more inaccuracy:
 
"Jamison...recommends that borrowers wishing to raise their credit scores first check their credit limits and evenly distribute the balances they’re carrying to help increase their credit scores, or that they pay them off in full to get the highest score increase."
 
Paying them off in full does not get you the highest score increase.  Paying half of them in full and letting the rest report 1% gets you the highest score increase.
 
----------------------------
App free since 7/11/08.
TU 744 / EX 710 / EQ 694 (Starting to slip. Smiley Surprised )
Message 7 of 11
Regular Contributor

Re: Raising credit scores



cheddar wrote:

Thanks for the link to the full article.


Aside from the minor point I mentioned above about how FICO treats CLs that don't report, I think this is a pretty good article. I was kind of surprised to see that the author even discusses GW and PFDs.


Sandy, if you find that you are using around 27% of your limits and are letting that amount of utilization report, you might want to consider trying to get some CLIs on your existing cards so that your reported utilization wil lbe lower. Otherwise, you can try playing the "pay before statement date" game that a lot of us here play in order to control the balances that the CCs report.



Message Edited by cheddar on 03-11-2008 04:03 PM




Yep in the same boat, my CC's have small CL's and it is difficult to keep util down under 10%, and will try for CLI's (great idea Cheddar, once I get that boost from my paying all of them down this month, hopefully, fingers crossed) and that should help manage my util better...
Message 8 of 11
Frequent Contributor

Re: Raising credit scores



cheddar wrote:
Thanks for the link to the full article.
 
Aside from the minor point I mentioned above about how FICO treats CLs that don't report, I think this is a pretty good article.  I was kind of surprised to see that the author even discusses GW and PFDs.
 
Sandy, if you find that you are using around 27% of your limits and are letting that amount of utilization report, you might want to consider trying to get some CLIs on your existing cards so that your reported utilization wil lbe lower.  Otherwise, you can try playing the "pay before statement date" game that a lot of us here play in order to control the balances that the CCs report.
 


Message Edited by cheddar on 03-11-2008 04:03 PM

          Cheddar,
 
          "Pay before statement date" seems appropriate in my case.  
          Thanks for taking the time to read the article and give me some con-
          structive advice.
 
          SandyK
Message 9 of 11
Established Contributor

Re: Raising credit scores

I got a AMEX card with a $1000 limit. I had a $654 balance on the card and my TU score went from 708 to 688 until AMEX updated my next months balance. My UTL was still under 9% across all of my cards.
Advice is what we ask for when we already know the answer but wish we didn't.
Message 10 of 11