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Utilization question- Is it better to spread out charges below 30% or make heavier use of a few?

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NRB525
Super Contributor

Re: Utilization question- Is it better to spread out charges below 30% or make heavier use of a few?


@Anonymous wrote:

I have 22 credit cards. All are currently at zero balances.

 

My available limits total about $191,000

 

I need to spend about about $42,000 on a big marketing project and I'll be able to pay it off within about 6 months. 

 

My question is whether I should spread the $42,000 out over multiple cards, keeping the utilization below 30% or whether I would be ok taking only a few of the cards to 50% utilization. It seems like having the multiple card balances outstanding might also cause the score to drop, but I don't know what's worse.

 

 

Thanks!


You need to list out the cards involved, which CCC each card is with, because that matters. Taking your debt from virtually $0 to $42k is likely to cause certain banks to freak. Barclays comes to mind.

 

If this is a marketing project, it is for a business. Do you have business credit you can utilize?

 

Payoff is in 6 months, what is the timing of how fast the spend occurs? Is this reimbursed from a client, or for your own buslness to be paid out of existing funds? Does it go to $42k with no payments, or that's the overall spend and the open balance is something less than that?

 

Bottom line, because of the amount involved, FICO is going to be the least of your worries. Keeping your credit card companies quiet will be the challenge. They will notice this, and some will react.

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
March 2021 $33k on $312k EQ 796 TU 798 EX 801
May 2021 Paid all Installments and Mortgages, one new Mortgage EQ 761 TY 774 EX 777
April 2022 EQ=811 TU=807 EX=805 - TU VS 3.0 765
Message 11 of 14
Anonymous
Not applicable

Re: Utilization question- Is it better to spread out charges below 30% or make heavier use of a few?


@Anonymous wrote:

@Anonymous wrote:

I have 22 credit cards. All are currently at zero balances.

 

My available limits total about $191,000

 

I need to spend about about $42,000 on a big marketing project and I'll be able to pay it off within about 6 months. 

 

My question is whether I should spread the $42,000 out over multiple cards, keeping the utilization below 30% or whether I would be ok taking only a few of the cards to 50% utilization. It seems like having the multiple card balances outstanding might also cause the score to drop, but I don't know what's worse.

 

 

Thanks!


By "ok" do you mean "I'd be at zero risk of creditors getting worried and taking adverse action"?  (Like lowering your credit limits?) 

 

Or are you asking whether having cards at their individual utilization of 51% might cause an additional score drop?

 

If it is only the latter, does it actually matter if there was a small additional score drop?  For example, are you planning to buy a car or a house in the next three months?

 

PS. You mention that all of your cards are reporting at $0 right now.  Just as an FYI, that causes you to take a score hit.  Your score will be higher if at least one of your cards reports a positive balance.

 


Hello to everyone posting on this thread!  Just a quick thought here.

 

Early in this discussion (see above) I observed that the OP might be asking about AA (adverse action) or the OP might be asking about FICO impact.  The OP has not gotten back to us without an answer to that.

 

But many of us are deciding what we think the OP meant and responding accordingly.  There's a real possibility (or certainty) that some of us are therefore going down a rabbit hole, or at least not responding to the initial concern. 

 

Just worth thinking about.  Best wishes to everyone for the holidays...

Message 12 of 14
noobody
Established Contributor

Re: Utilization question- Is it better to spread out charges below 30% or make heavier use of a few?


@Anonymous wrote:

@noobody wrote:

let me put an example

 

I have 10 cards with 10K CL each same APR, I want to charge 15K and pay it off in 6-9 month

 

Which scenario get me higher FICO?

 

#1: 2 cards with 7500 each on Cap1 and rest 0 Balance

 

#2: 1500 across the board

 

I would not worry about AA as my score is high enough and no bunch of recently opened accounts, just in case some good deal like 140K Ritz pop up during this period, i can get approved with decent CL.


Great question, Noobody.  I like the way you made it a specific thought-experiment.

 

The answer is: neither #1 or #2 is probably best.  Best would be three cards at $5000 or four cards at $3750. 

 

There are three relevant FICO factors in this thought-experiment:

 

(a) Total utilization

(b) Utilization on each card considered by itself

(c) Number of cards showing a positive balance

 

(A) is the same in all scenarios so we can ignore it.  (B) matters a lot the closer a card gets to being maxxed out.  Thus two cards at 75% might have a significant (though not huge) impact.

 

In your experiment you want to balance factor B and C.  You want as many cards reporting $0 as possible, but not so many as will cause the cards that do report to have a high utilization.

 

My guess is that three cards at 5k is the sweet spot for the situation as you defined it.

 

One final thought.  The set of priorities as you defined them were to be solely interested in the FICO impact.  If you broaden that very slightly to include "credit scoring impact by potential future lender" then you should at least be aware of the following.  In the past there was no downside at all (aside from paying interest) to placing money on credit cards and then slowly paying it off.  Starting next year, however, that is expected to change.  Lenders will be able to see if you have "carried a balance" like that in the past, and if you had, they may consider that a drawback in deciding whether to lend to you.

 

Here is a recent discussion about that:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Utilization-per-card-or-overall/m-p/4353439#M102076

Thank you for detailed explanation,
Make great sense. Similar question pop up at Ring's ask FICO rep event, the rep basically said lower utility make better FICO, which like saying nothing.
I did #1 in August, utility jump from 0 to 11%, 2 cards out of 13, FICO drop from 800 to 770.
EX819 1HP|TU797 1HP| EQ(Fico8 BankCard)841
Message 13 of 14
NRB525
Super Contributor

Re: Utilization question- Is it better to spread out charges below 30% or make heavier use of a few?


@Anonymous wrote:



 


 


 

But many of us are deciding what we think the OP meant and responding accordingly.  There's a real possibility (or certainty) that some of us are therefore going down a rabbit hole, or at least not responding to the initial concern. 

 

 


myFICO members answering the question they want to rather than the question posed? Say it ain't so! Smiley Tongue

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
March 2021 $33k on $312k EQ 796 TU 798 EX 801
May 2021 Paid all Installments and Mortgages, one new Mortgage EQ 761 TY 774 EX 777
April 2022 EQ=811 TU=807 EX=805 - TU VS 3.0 765
Message 14 of 14
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