05-14-2009 09:54 AM
This is going to sound silly - but as a "financial type" I understand that the method can affect the outcome......
I have been working at paying down a bunch of cards that I maxed out when I relocated last year - it has been TOUGH seeing as though I am still paying two house payments!
So - do they take your total outstanding balances/total available credit to determine utilization?
Or - do they look at each card individually and average together.... such as:
Home Depot 0% $0/500
Capital One 4% $20/500
Capital One 0% $0/500
Barclays 7.7% $348/4500
and then average all of them together.....?
By my calculations - it would make a small - but positive difference in my utilization to have my 0% to divide by.....
Whereby it might be of value to both my fico score and $$$$ to transfer a balance from a high interest rate 44% utilized card to a low balance transfer interest rate on another card that has 8% utilized? (I could transfer balances from 2 cards that are high interest rates (20%'s range) to a 3.99% offer on on card - getting two more 0% utilization cards and one now at 65% istead of 8% AND the added benefit of the lower interest rate so I can pay off the balance sooner with less overall interest expense.
Clear as mud?
05-14-2009 10:56 AM
Both your overall util% and the util% on each account are considered into your score. To use your example:
Home Depot $0/500 0%
Capital One $20/500 4%
Capital One $0/500 0%
Barclays $348/4500 7.7%
So overall 368/6000= 6.1% utilization.
For the highest possible FICO, you want more than half of your account to show a zero balance, and <10% util on each card with a balance, as well as <10% combined.
Moving a balance from a high interest rate to a low one is good for your wallet, but as far as whether or not a BT will affect your FICO positively, there's really no way to know unless we get more information. Does the card you're transfering to have a higher CL? What would the new util% be after the transfer?
05-14-2009 11:25 AM
That won't work directly. You must pay off the 8% utilized card so the balance is zero. Otherwise when you do the BT at 3.99% all of your payments will go to the 3.99% balance. You will pay the full interest on your existing balance until the very end.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions based on Experian or Equifax data (additional FICO® Score versions based on TransUnion data are not currently available on myFICO.com). Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.