Utilization - Better to Load Up on Few or Spread it Out to All CC??

[efranklin23]

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@Alberio wrote:

I have four credit cards - all of which I have had for at least ten years.  I utilize just over 60% of my credit.  I know that is high and I am working to reduce it.  In the meantime, assuming I need to carry that much debt for now, is it better for my credit score to spread the utilization across all the cards, or is it better for my credit score to pay off two cards (carry $0 balance) and come close to the limits on the other two?

Thanks!

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to answer your question, it really depends on a couple fo things like the interest  on the cards and the CL. But having overall credit over 30% is not recommended by any means. Spreading around the limits may not help if you have to pay the BT fees on top of high interest fees. The good thing about spreading limits is that you can avoid the maxed out on a card which can definitely knock your CS down. 

[indiolatino61]

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@Alberio wrote:

I have four credit cards - all of which I have had for at least ten years.  I utilize just over 60% of my credit.  I know that is high and I am working to reduce it.  In the meantime, assuming I need to carry that much debt for now, is it better for my credit score to spread the utilization across all the cards, or is it better for my credit score to pay off two cards (carry $0 balance) and come close to the limits on the other two?

Thanks!

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FICO algorithms take into account overall utilization, per card utilization and number of cards showing balances. What the distribution of these parameters are is anyone's guess. With 4 cards, I would guess that showing 60% on one and 0 on the others is most favorable score-wise since 60%, although high, is not considered "maxed-out." IMO, a 60-0-0-0% profile is better for scoring than a 15-15-15-15% profile. The only real way to know how it affects you personally is to check each one out, since with credit it's always a YMMV kind of thing. The best of luck to you.

[Weights]

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@Alberio wrote:

Thank you for all of the very helpful responses.  I have had each of these cards in good standing for a decade or more.  I don't want to ask for a CLI or get another card even though (at least with a CLI) I think I would get what I am asking for, because I am in the mortgage process and don't want any HPs on my record or new accounts opened. 

We were supposed to just be relying on my husband's credit and income for the mortgage, but it appears that because of the way he files his taxes and the exemptions etc., he will not meet the stringent DTI requirements without my income counting as well.  That means my credit score - to which I was taking a long-term improvement approach - is now front and center and will solely determine our eligibility for amounts and interest rates.  So I am trying to figure out what I can do in the short term to bump up my scores. 

Although I was divorced more than four years ago, for those that asked what the circumstances that led me here were - it was primarily that and the aftershocks of that.   My ex and I sold our home at a massive (several hundred thousand dollar) loss during the divorce, attorneys are expensive, and I was laid off in the midst of all that.  I was standing in the middle of the blast zone with nothing remaining of my career and my marriage.

Happily, I have completely turned all that around, but I still have major financial scars to show for it.  They are healing, but not fast enough for what I want to achieve now. 

Anyway, thanks again for all of the guidance.  It is invaluable.

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I'm so sorry to hear about your past troubles, and am glad that things have moved forward for you in the right direction.  Many of us have been in bad positions like this at one time or another, but I certainly commend you for taking the right steps.  LIke some others on here, I'm unsure as to which approach would yield a higher fico score. 

That said, I recommend attacking the card which is costing you the most right now in terms of revolving the balance, regardless of whether it maximizes fico in the immediate vicinty.  Then attack the next expensive one, etc.  By doing so, you probably can get utilization down quicker from all aspects, allowing your overall credit to recover more rapidly, and potentially getting that house sooner.  If fico score is still more of the concern right now, then based on what others are saying, your probably better off paying as much as you can on each card to get the individual account utilization down.  You could also try calling the various issuers and asking for a lower apr rate based on payment history, as every little bit helps.  I just wouldn't recommend telling them too much, as you don't want to risk AA such as a CLD based on this.

I wish you and your husband the best of luck going forward with the home purchase!

[SorenX]

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"Let's say that if you were doing things right, you're score wouldn't be as low as it is now. "

Okay, yes.  Granted.  That was a useless and non-constructive response. 

Agreed. You said you knew it was high. Not sure what the point of the comment was.

[vanillabean]

I sense that a baddie rather than the util is the culprit. Unfortunately, it’s unlikely for anyone with a baddie to cross 700 or thereabout. I suggest you consider minimizing interest payments too.

When that’s said, the downside of having fewer balances reporting is higher util on those cards. The extreme is one card reporting, but maxed out. So I suggest using the highest credit limit for that.

[CreditTrauma]

Your score is lowered any time you charge more than 30% of each cards limit. Therefore it would be best to spread out your debt over your 4 cards and work on getting them down to 30% and below.

Your score also takes into account the time you've had each card, so even after you've paid them off, don't close them so you can improve your history even more, since you've already had them 10 years. Just charge a small amount on them every few months to keep them active and reporting, and so the creditor doesn't close them for non-use, then pay them off each month.

Work on paying down the highest interest rate cards first, so you save the most money.

Hope this helps and good luck to you!

[smittyboy020]

This is exactly what I did. I went from 97% to 32% util, and my scores shot up 75 points (+/-). I make huge payments, also.

[Vegas247]

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@indiolatino61 wrote:

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@Alberio wrote:

I have four credit cards - all of which I have had for at least ten years.  I utilize just over 60% of my credit.  I know that is high and I am working to reduce it.  In the meantime, assuming I need to carry that much debt for now, is it better for my credit score to spread the utilization across all the cards, or is it better for my credit score to pay off two cards (carry $0 balance) and come close to the limits on the other two?

Thanks!

---

FICO algorithms take into account overall utilization, per card utilization and number of cards showing balances. What the distribution of these parameters are is anyone's guess. With 4 cards, I would guess that showing 60% on one and 0 on the others is most favorable score-wise since 60%, although high, is not considered "maxed-out." IMO, a 60-0-0-0% profile is better for scoring than a 15-15-15-15% profile. The only real way to know how it affects you personally is to check each one out, since with credit it's always a YMMV kind of thing. The best of luck to you.

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60-0-0-0 is your best bet......indiolatino is absolutely correct...I read a recent post much like this one, and spreading the balances like 15-15-15-15 is bad for your score. The reason is your score will drop because of too many lines of credit with a balance.....60-0-0-0 is best.

[michaeljosephMBA]

It is never a good idea to load up on a few credit cards. And you should always maintain your balances under the utilization rate of 75%. So in answer to your question do not go to an extreme but it is better to build your credit by applying for and obtaining the lowest annual interest rate cards and spreading it out over several credit cards. As you maintain your utilization under 75% on all of them your credit fico score will gradually increase. Do not go out and get so many credit cards however that your borrowing exceeds your income ratio. Whoever responded so unprofessionally to  your response with the ecotistical answer that your not doing things right because your credit scores are so low is an idiot.

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@megaman1 wrote:

Let's say that if you were doing things right, you're score wouldn't be as low as it is now.

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[red259]

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@CreditTrauma wrote:
Your score is lowered any time you charge more than 30% of each cards limit. Therefore it would be best to spread out your debt over your 4 cards and work on getting them down to 30% and below.

Your score also takes into account the time you've had each card, so even after you've paid them off, don't close them so you can improve your history even more, since you've already had them 10 years. Just charge a small amount on them every few months to keep them active and reporting, and so the creditor doesn't close them for non-use, then pay them off each month.

Work on paying down the highest interest rate cards first, so you save the most money.

Hope this helps and good luck to you!

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What is the basis for this statement? The getting balances down below 30% may be sound, but all the advice I have ever seen here indicates that you do not want balances reporting on multiple cards if you can avoid it.