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Valued Contributor
creditnocash
Posts: 2,255
Registered: ‎07-23-2012
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Re: Utilization Theories

not only balances, and cards reporting but also age.... 

 

when you use the simulator in myfico it says best course of action for 2 years of on time payments. 

 

so the months you pay your balances down your also gaining history. I guess that wouldnt matter so much for someone with 5+ years though. 

 

my utilization jumped form 4% 1 card reporting to 20% 5 cards reporting and 3 cards show to be more then 70% used my score plummeted 30 FICO points on sw. yet before that I reported 4-7% on 1 card and was at my highest at 712. 

 

my aaoa is about 10 months with 8inq on eq. (2 are car related) (3 are pulls for my bank for dumb things) 

but honestly I did it for the theory more then applying for credit. 

It was fun seeing my score go up or down on one little technicality. 

but then again im young and when all my inq's fall off and my util is at the 4% my score will surely benefit from it. 

Current: Discover Fico 701 10/14 Walmart Fico 689 9/14

Inquiries (24 Months): EQ 3 TU 0 EX 0 | Most Recent: 09/26/2014


2014 Goals:
Lower Utility
47%(OUCH!!)
Freedom Signature

Amex Zync(Unicorn)
Chase Freedom$1500
Discover IT$2900
Citi Diamond Preferred$6000
Citizens Mastercard$7000
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Revelate
Posts: 9,762
Registered: ‎12-30-2011
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Re: Utilization Theories

[ Edited ]

algorithmslave wrote:

webhopper wrote:

Hi there!

 

I'm going to step outside the box and state that I don't follow the robotic utilization patterns unless I'm going to be applying for something in that month.  Certainly if the scores are very important and if you want to minimize utilization as a game, then following the utilization pattern of <9% utilization on one card and all other cards reporting a zero balance will give you the desired results.

 

What I do try to do is keep all of my spending on my Amex charge card, which doesn't impact my utilizations.   The benefit to letting a balance report depends on the lender. If your total CL on a card is 4k, and your highest balance ever reported on the card is $350, then why would that creditor or any other creditor be tempted to give you higher limits?

 

If you can show that you use your current lines reponsibly, then you can get higher limits in the future.  Irresponsible behavior such as "maxing out" cards, and missing payments or only paying the minumums should be avoided at all costs.

 

that's my 2 cents worth!


I agree with most of what your saying. There is, however, a minor detail that should be discussed. You mentioned a category on ones CR called "Highest Balance". I would not look to FICO for such answers, assuming you did. I would call one of the big three CB and ask if a lender has access to view that category. My understanding is, lenders do not have access to view that category. 


I'm nearly 100% confident all lenders see the high balance reported on a revolving credit tradeline.  I have seen a credit report pulled from my original auto loan and IIRC it was reported there.  

 

From where is the reference that lenders don't have the ability to view that rather basic piece of information regarding a credit card?  I'll admit I could be mistaken, but this is about as fundamental as the CL on a card; actually, it's nearly identical given the fact for the majority of credit card history, high balance was the limit that was not only reported but also calculated upon in the days before CL's were explicitly stated.

 

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


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nishant1
Posts: 107
Registered: ‎12-23-2012
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Re: Utilization Theories

I am not clear about the exact conclusions of previsous discussion threads.

 

We donot have cause- effect relationship between utilization and drop in credit score other than general known trend that higher the utilization - higher are chances of reduction in score over long term - say typically 6 to 12 month period.

 

Average utilization which total of charges on all credit card divided by total available credit on credit cards.

 

Does it matter if my overall average utilization is less than 10% but for a single card with 5% cash back, that particular card in that particular quarter has utilization is say 50% to get full benefit of rewards?

 

Does creditor has access to data on whether balance is paid in full or partial? That can reveal bigger picture?

Frequent Contributor
Sparkz1920
Posts: 271
Registered: ‎08-09-2009
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Re: Utilization Theories


bernhardtra wrote:

Utilization in regards to your credit report actually does not have a history.  40% is the recommended for people without any serious deliquencies or bankruptcies and 20% for those that do.  This part of your score changes as you decrease or increase the balances on your account.  One aspect of it is also the amount on one card.  If that one account is way too high then it can have a bit of an impact on your score too.  I actually read most of this right from FICO!


Yup...My score went down from 670 to 662...I had an 89 balance as well as other balance report...My overall util is under 5%...probably under 3% at the time

 

Could have also been my loan consolidation...that could have removed the history from 2007 and dropped it a bit


Starting Score: 601
Current Score: 670
Goal Score: 700


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Valued Contributor
creditnocash
Posts: 2,255
Registered: ‎07-23-2012
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Re: Utilization Theories


nishant1 wrote:

I am not clear about the exact conclusions of previsous discussion threads.

 

We donot have cause- effect relationship between utilization and drop in credit score other than general known trend that higher the utilization - higher are chances of reduction in score over long term - say typically 6 to 12 month period.

 

Average utilization which total of charges on all credit card divided by total available credit on credit cards.

 

Does it matter if my overall average utilization is less than 10% but for a single card with 5% cash back, that particular card in that particular quarter has utilization is say 50% to get full benefit of rewards?

 

Does creditor has access to data on whether balance is paid in full or partial? That can reveal bigger picture?


unless said creditor is the creditor is the one reviewing no. 

what is the full beneifit of the rewards though? 

i used the 5% categories on the chase freedom and pif before statement cut and i still reaped the rewards. i havent had a single min payment since i opened the card in july and have gotten about 250 cash back including the 100 bonus sign up. 

 

text in red- how do you figure? if you pay your balance to reflect one card reporting and only less then 9% util reporting in total your score should rebound. from util deficit anyways. 

Current: Discover Fico 701 10/14 Walmart Fico 689 9/14

Inquiries (24 Months): EQ 3 TU 0 EX 0 | Most Recent: 09/26/2014


2014 Goals:
Lower Utility
47%(OUCH!!)
Freedom Signature

Amex Zync(Unicorn)
Chase Freedom$1500
Discover IT$2900
Citi Diamond Preferred$6000
Citizens Mastercard$7000
Valued Contributor
TiggerDat
Posts: 1,074
Registered: ‎10-15-2011
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Re: Utilization Theories


webhopper wrote:

Hi there!

 

I'm going to step outside the box and state that I don't follow the robotic utilization patterns unless I'm going to be applying for something in that month.  Certainly if the scores are very important and if you want to minimize utilization as a game, then following the utilization pattern of <9% utilization on one card and all other cards reporting a zero balance will give you the desired results.

 

What I do try to do is keep all of my spending on my Amex charge card, which doesn't impact my utilizations.   The benefit to letting a balance report depends on the lender. If your total CL on a card is 4k, and your highest balance ever reported on the card is $350, then why would that creditor or any other creditor be tempted to give you higher limits?

 

If you can show that you use your current lines reponsibly, then you can get higher limits in the future.  Irresponsible behavior such as "maxing out" cards, and missing payments or only paying the minumums should be avoided at all costs.

 

that's my 2 cents worth!


Utilization is good to consider for four reasons.

 

1.  Applying for new credit.

2. Getting CLI's

3.  Solicitation for new credit.

4.  Nervouse lenders.

 

While the first and second one can easily be dismissed and played with in the month that you wish to do extend your credit, the other two cannot.  Depending on the creditor who is soliciting you this might be a factor when they ask the credit bureaus for a list of candidates.  Certainly some lenders are more nervous than others and if they see a large utilization it might actually affect how they treat your account.  It could mean a lower interest rate offered to you or even an extension of credit on their end.  Using all your available credit could cause some lenders to simply decide that you are a greater risk.  I say could, so don't all of you jump and cry foul at once. 

 

I think it always wise to get limits increased as often as possible to avoid issues with utilization.  I also think it wise to never carry a balance forward.  While there is no easy way for creditors to track whether this is revolving or new purchases, it can be done to some small degree.  I think Capone figured this out long ago, they are known for getting a soft pull as often as once a week.  There must be a reason they do this or a few reasons they do it.  They certainly have reasons they do what they do, not all of them in the best interest of the customer!  How many sub-prime cardholders do they have?  If they know the risk of these individuals then they can take steps to insure their strategies are met by knowing the utilization of their customers. 

 

To test some of the theories about utilization and how it affects a score I loaned one of my cards to my sister.  I'm not paying for the interest so I don't really care how much is charged to it.  I also care how much is charged to it to, to test this and other theories!  It does affect your score!  Even one card nearly maxed out affects the score even if your overall utilization is less than recommended!  Since I am just gardening anyway, her debt to my card is not that important and helps with the high balance on the report.  (Don't worry, I can pay off her debt in a hearbeat if needed!  I have ten times in savings to what she owes on the card!)  I am waiting to see what the threshold is for one card compared to overall usage!  I owe about $25 on my cards right now, she owes the other 20% of my utilization!  (Yeah, I am benefitting from her using the card in the long term, both with that card and with my overall report!)  It will be interesting to find out how much utilization on one card is weighed to the overall and about what that % is.



Rethink every purchase you make, before you make it. Use the card with the best rewards. Pay in full each month. Redeem rewards often. Use the cards online shopping for more discounts. Smile, knowing that being thrifty allows you to actually get more out of the same amount of money!
Valued Contributor
TiggerDat
Posts: 1,074
Registered: ‎10-15-2011
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Re: Utilization Theories

Remember, utilization affects different people differently.  If you have no negatives on your report then the recommended utilization is under 40%.  If you have negative items on your report then the recommended is under 20%.  And this is definitely true!  I have a student loan payment issue on my report and my utilization has to be under 20% for a higher score!  Even one card with a high utilization can affect this.  It doesn't matter if the overall utilization is less than 20%, the score will drop if that card has a high utilization on it.  At this point I can't tell you what it is, since I loaned one card to my sister to use and she had it up to 73%.  My score dropped even though my utilization was not high.  Overall it has topped out at 23%.  With this months payment I will know the result in a few days.  The utilization will drop to 47%.  (Partially due to the payment and partially due to the fact they gave me yet another CLI.)  I won't be able to monitor effectively the percentage threshold for the score drop if the score raises again.  I will be able to do so if the threshold has not yet been reached at a later date, say when the utilization is lower than 40%, 30%, etc.  I will know if there is no other score increases later that the threshold will be between 50% and 70%. 

 

Utilization, unlike other factors, has no history involved with it.  So your score should rise again when overall and individual utilization is below the threshold points.  Some have pointed out there is no way to know by creditors if the amount reported is PIF or revolved.  This is only partially true and is dependent a bit on how often a creditor checks your report.  For example, I noticed a long time ago that Capone was soft pulling my report about every week!  They could easily put this info into a database and compare the account amounts for some reflection on what you are actually doing.  If you card reports paid in full one month, before you go back to charging on it, then they could partially deduce that you are likely PIF'ing.  This info could be useful to a bank in deciding what card or upgrade product to offer you.  If you are paying in full, then they could target you for a new product with a lower interest rate or one with rewards to sway you to chose a different product and use their product more.  Even if they aren't making interest off you, they make money off the transactions.  I use the card with the best rewards and other terms the most and always PIF each month!  I even make sure that if any of my other creditors are monitoring it so closely, they can see that!  I do want a card with low interest and great rewards one day, so I even make sure I monitor my utilization so that I can benefit from solicitation!  And by benefit, I mean take the card as quick as it is offered to me!  That is when I can start closing cards or let them close on their own naturally!



Rethink every purchase you make, before you make it. Use the card with the best rewards. Pay in full each month. Redeem rewards often. Use the cards online shopping for more discounts. Smile, knowing that being thrifty allows you to actually get more out of the same amount of money!
Valued Contributor
SnackTrader
Posts: 1,567
Registered: ‎09-15-2012
0

Re: Utilization Theories


bernhardtra wrote:

Remember, utilization affects different people differently.  If you have no negatives on your report then the recommended utilization is under 40%.  If you have negative items on your report then the recommended is under 20%.  And this is definitely true!  I have a student loan payment issue on my report and my utilization has to be under 20% for a higher score!  Even one card with a high utilization can affect this.  It doesn't matter if the overall utilization is less than 20%, the score will drop if that card has a high utilization on it.  At this point I can't tell you what it is, since I loaned one card to my sister to use and she had it up to 73%.  My score dropped even though my utilization was not high.  Overall it has topped out at 23%.  With this months payment I will know the result in a few days.  The utilization will drop to 47%.  (Partially due to the payment and partially due to the fact they gave me yet another CLI.)  I won't be able to monitor effectively the percentage threshold for the score drop if the score raises again.  I will be able to do so if the threshold has not yet been reached at a later date, say when the utilization is lower than 40%, 30%, etc.  I will know if there is no other score increases later that the threshold will be between 50% and 70%. 

 

Utilization, unlike other factors, has no history involved with it.  So your score should rise again when overall and individual utilization is below the threshold points.  Some have pointed out there is no way to know by creditors if the amount reported is PIF or revolved.  This is only partially true and is dependent a bit on how often a creditor checks your report.  For example, I noticed a long time ago that Capone was soft pulling my report about every week!  They could easily put this info into a database and compare the account amounts for some reflection on what you are actually doing.  If you card reports paid in full one month, before you go back to charging on it, then they could partially deduce that you are likely PIF'ing.  This info could be useful to a bank in deciding what card or upgrade product to offer you.  If you are paying in full, then they could target you for a new product with a lower interest rate or one with rewards to sway you to chose a different product and use their product more.  Even if they aren't making interest off you, they make money off the transactions.  I use the card with the best rewards and other terms the most and always PIF each month!  I even make sure that if any of my other creditors are monitoring it so closely, they can see that!  I do want a card with low interest and great rewards one day, so I even make sure I monitor my utilization so that I can benefit from solicitation!  And by benefit, I mean take the card as quick as it is offered to me!  That is when I can start closing cards or let them close on their own naturally!


Believe me, if you want an 800 score, all else being equal, you want utilization under 10%. I'm not saying you can't get there with higher utilization than that, but I am saying that putting your utilization under 10% will always get you a score increase. 20% or 40% is a good start, but you HAVE to get lower to get the best impact. 

 

I understand that the question involves other utilization theories, but all of that is going to speculation and subject to individual experiences. The 1% - 9% theory is not subject to individual experiences (except in extreme situations of 400 and 500 credit scores, where utilization is the least of your worries). So that's where my advice ends. 


In My Wallet: Amex BCP (12/12) $22.200, Cap1 Quicksilver (6/12) $14,000, Chase CSP (4/14) $12,000, Barclaycard Rewards (5/13) $10,500, Citi Forward (12/12) $9,600, Chase Freedom (12/12) $5,000

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Established Contributor
cashnocredit
Posts: 1,037
Registered: ‎07-18-2009
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Re: Utilization Theories


webhopper wrote:

Hi there!

 

I'm going to step outside the box and state that I don't follow the robotic utilization patterns unless I'm going to be applying for something in that month.  Certainly if the scores are very important and if you want to minimize utilization as a game, then following the utilization pattern of <9% utilization on one card and all other cards reporting a zero balance will give you the desired results.

 

What I do try to do is keep all of my spending on my Amex charge card, which doesn't impact my utilizations.   The benefit to letting a balance report depends on the lender. If your total CL on a card is 4k, and your highest balance ever reported on the card is $350, then why would that creditor or any other creditor be tempted to give you higher limits?

 

If you can show that you use your current lines reponsibly, then you can get higher limits in the future.  Irresponsible behavior such as "maxing out" cards, and missing payments or only paying the minumums should be avoided at all costs.

 

that's my 2 cents worth!


 

Yep. I completely agree.

 

It's interesting to speculate how we would be talking about util if FICO Capacity Scores were obtainable by consumers instead of just by lenders. Just because we can't get the scores doesn't mean it, or similar non-public scores aren't a major factor in credit and CLI granting. It seems clear to me that many strategies aimed at low Util are likely ones that produce less than attractive metrics on those other scores.

 

I have reestablished credit over the last couple years
so my moniker is, well, rather out of date.

WM Discover $1800, WF Plat 12k, Chase Freedom Siggy15k, Amex Plat (60k H/B), Citi AA EWMC 25k
Valued Contributor
Duncanrr
Posts: 2,857
Registered: ‎06-08-2012
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Re: Utilization Theories

Im going to have 8k/25k report on my NFCU card this month.  All my other cards will have a zero reported balance except AMEX Zync which will be about 700 (highest reported balance on this card was 8.8k).  I will pay it off in about 3 months.  During this time this will be the only card I let report a balance.  Hopefully, it will not hurt my UTIL too badly.



Starting Score: EQ 551 TU 548 CK 607on 6/8/12, EX 542(AMEX pull 3/4/12)
Current Score: EQ 710 TU 727 EX 704 CK 719(FAKO-EX 697, EQ 697, TU 697)
Goal Score: 750

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