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Debt to credit ratio question

Established Member

Debt to credit ratio question

Does 0% (or whatever percent) get the same grading or score benefits regardless of limits, all other things being equal?

Better said, If I have 0% debt with $25,000 in limits, is it graded higher, lower or the same if I had $75,000 in limits with 0% debt?
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Scores fluctuate from peak of 790 to lows of 680. Current normal low 700's avg. I have no goals.
Message 1 of 14
13 REPLIES
Established Member

Re: Debt to credit ratio question

It’s the same as long as you have a zero balance. The difference is when you start having a positive balance. Then higher limits are better.



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Message 2 of 14
Established Member

Re: Debt to credit ratio question

You mean in terms of 1% or greater? To say that 1% equals more money I get to spend and still keep at 1% lol

Still you would think that having 0% is a greater feat to achieve with higher limits than it is with someone who has say $2000.
Discover $13,500
Regions Visa $11,000
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BOA $4,000
US Bank $2,000
Balances all zero except Amazon
Scores fluctuate from peak of 790 to lows of 680. Current normal low 700's avg. I have no goals.
Message 3 of 14
Established Member

Re: Debt to credit ratio question

Still i'm not sure I can agree with you because I know it makes a HUGE difference on the backend or in reverse. If you have one card with a $5000 limit and paid down to 0% you only pick up a few points. But if you have $75,000 in limits and pay down to 0% you can pick up 50-100 points. That's why I was curious that once you do that and it's all down to zero how much more that reflects.

One guy, one card, $5000 limit. Or same guy with the same card with a $50,000 limit. Just curious if his score would be the same if he had 0% either way
Discover $13,500
Regions Visa $11,000
Citi Diamond Preferred $10,500
Regions Visa $10,000
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Amazon $5,600
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BOA $4,000
US Bank $2,000
Balances all zero except Amazon
Scores fluctuate from peak of 790 to lows of 680. Current normal low 700's avg. I have no goals.
Message 4 of 14
Community Leader
Senior Contributor

Re: Debt to credit ratio question

 


Plumber101010 wrote:

One guy, one card, $5000 limit. Or same guy with the same card with a $50,000 limit. Just curious if his score would be the same if he had 0% either way

Great question, Plumber.  His score would be the same either way.

 

In fact, assuming that in both situations his CC utilization is the same (1%, 5%, etc.) his score will be the same.  A 50k limit with a 3% utilization does not get you a better score than a 5k limit with a 3% utilization.

 

PS.  If his utilization is truly 0% (meaning $0 across all cards) he will incur a scoring penalty, compared with having at least one card reporting a small balance (e.g. $5).

Message 5 of 14
Established Member

Re: Debt to credit ratio question

I love a great answer! LOL. Thank you. And yes I agree and that's why I do always leave some money on Amazon. It's such a tedious and almost impossible process doing "tests" to figure out what's the best way to peak ones score. Doing things, waiting 30 days, doing other things, waiting 30 days.. unless you can contribute yourself to full-time game playing with credit bureau's, it's really quite the endeavor! But you'll almost always find that the individuals with the highest scores possible, is always the simple man/woman with the simple credit. ONE credit card, ONE car loan, maybe ONE mortgage. Those cats are always coming in the 800's LOL.

There's a lesson to be learned there. Smiley Happy
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BOA $4,000
US Bank $2,000
Balances all zero except Amazon
Scores fluctuate from peak of 790 to lows of 680. Current normal low 700's avg. I have no goals.
Message 6 of 14
Community Leader
Legendary Contributor

Re: Debt to credit ratio question

The problem with low limit cards is that it is much easier to reach a higher % util.

Thus, they need much closer monitoring to keep within desired util ranges.

 

If you charge $100 on a $300 limit card, you have a % util of 33%.

The same charge on a $3,000 limit card would only be a util of 3.3%.

 

Higher limit cards thus inherently provide a cushion.

Message 7 of 14
Community Leader
Senior Contributor

Re: Debt to credit ratio question


RobertEG wrote:

The problem with low limit cards is that it is much easier to reach a higher % util.

Thus, they need much closer monitoring to keep within desired util ranges.

 

If you charge $100 on a $300 limit card, you have a % util of 33%.

The same charge on a $3,000 limit card would only be a util of 3.3%.

 

Higher limit cards thus inherently provide a cushion.


All true.  But it's a common belief (and not an unreasonable guess) that FICO might give a scoring bonus inherently to people who have convinced CC issuers to extend them big limits.  And thus people chase bigger limits thinking that in itself will help them.  (The signatures of forum contributors can make people draw this inference too.)

 

So when the question comes up, it's worth correcting any misapprehension.  It takes a person with a low credit limit more attention to keep his util low (typically two payments a cycle rather than one) but he can still spend a lot and have an ultralow CC utilization.

Message 8 of 14
Established Member

Re: Debt to credit ratio question

Right, the limit in and of itself means nothing. But I would go on to add that it does help in regards to lowering your utilization. And this is for others reading all this and not for the people who know. So if you have a $10,000 limit and $5000 charged you have a 50% debt to credit ratio. Simply by getting your credit limit increased to $15,000, magically lowers it to 33%! Always a wonderful thing Smiley Happy
Discover $13,500
Regions Visa $11,000
Citi Diamond Preferred $10,500
Regions Visa $10,000
Capital One Spark $7,500
Amazon $5,600
Capital One Quick Silver $5,000
BOA $4,000
US Bank $2,000
Balances all zero except Amazon
Scores fluctuate from peak of 790 to lows of 680. Current normal low 700's avg. I have no goals.
Message 9 of 14
Valued Contributor

Re: Debt to credit ratio question


RobertEG wrote:

The problem with low limit cards is that it is much easier to reach a higher % util.

Thus, they need much closer monitoring to keep within desired util ranges.

 

If you charge $100 on a $300 limit card, you have a % util of 33%.

The same charge on a $3,000 limit card would only be a util of 3.3%.

 

Higher limit cards thus inherently provide a cushion.


I have around 200k of total limits.  The limit on my SPG is only 1k.  It reported with something like 360 dollars on it and it did not affect my credit score.  I have around 1 percent total utilization.  

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Message 10 of 14