Credit Card Utilization

[Anonymous]

Let's say you have 4 credit cards and are using 60% of the total available credit. Does it make a difference to your credit score if all of the balance is on one card or if you should spread it out to have a little on each card?

[joeaseer]

It goes by overall UTI and on a card to card basis. It's best to have less than 10% UTI on each card. Which means in your case spread that overall 60% to as much of your cards as possible. Your overall UTI would still be 60% though, which is above 30% so your score will drop a good amount. Basically you don't want your overall UTI to be above 10% and you really don't want it above 30%.

Your example is weird because that single card would need to have 62.5% or more of your overall credit line on it. If that's the cause you might want to garden for a while and not card about your credit score. 

Utilization is just a month to month thing, it only matters if you want to get new credit. It's good to get in the habit of having a low Utilization though. Which means only buying things you can pay for within a month or so.

[bdhu2001]

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@Anonymous wrote:

Let's say you have 4 credit cards and are using 60% of the total available credit. Does it make a difference to your credit score if all of the balance is on one card or if you should spread it out to have a little on each card?

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Generally yes, but YMMV. It works different for some.  Many get the best bang from having only 1 card report a balance, but a few have noted that their sweet spot is 2-3 cards.  You get a slight hike from having cards paid off and a slight decrease when an unused card suddenly reports a balance, irrespective of the amount.  The same would be true if the unused cards suddenly reported larger balances.

However, if you have a card that is above 90% and the rest of your cards have a zero balance, that maxed card is hurting your score.  Your best option is to pay it down, without moving the balance to other cards. Your second best option, is to see what card give a 0% transfer rate and doesn't have a fee.  Then pay off the balance a quickly as possible while paying less interest.

[SouthJamaica]

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@Anonymous wrote:

Let's say you have 4 credit cards and are using 60% of the total available credit. Does it make a difference to your credit score if all of the balance is on one card or if you should spread it out to have a little on each card?

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1. You should spread it out.

2. You should get it below 50%

[Anonymous]

Although you don't mention their credit limits, the four tradelines must look something like this (in proportion to each other):

Card A: 7k

Card B: 1k

Card C: 1k

Card D: 1k

Otherwise it wouldn't be possible to put 60% (6k) of the total credit limit (10k) on one card.

As joeaseer observes, that's just a bit of an odd situation -- where one card issuer is willing to grant you 7 times the credit as every other creditor.

Let me adjust your scenario a bit to make it close to what you asked but not quite as strange.  Suppose your cards were:

Card A: 5k

Card B: 3k

Card C: 1k

Card D: 1k

and your total debt was just under 5k.  Then if you ask the same question, the answer could be to spread it out over four cards at just under 50%.  It's quite possible, however, that three card at the same utilization with one card at $0 might be a bit better.  It's even possible that the two biggest cards at the same utilization with the other two at $0 might be better still.  That's because the penalty you get for having all four cards show a balance might be a little bit more than the penalty for being at 56% or 63%.  But what is certain is that one card at 98% (with three $0 cards) would be a lot worse.

[Anonymous]

It depends on how many card you have as well.

You don't want balances reporting on more than 50% of your cards (1 of 3, 2 of 5, 4 of 10) understand..?

You also want to keep total util to under 10% total for the sweet spot.    If you are using 60% of your total credit - but that is maxing out one of your cards - that is worse than letting 2 cards report smaller balances.   They don't like to see cards at close to Max (over 80%)

It's a combination.   Many people (if rebuilding) aim for the 3 cards total - let one report less than 10% of its credit line.    If you have more cards - then you can do it a little differently......Or if you don't need to apply for something immediately and need to  maximize your score - then pay off higher interest first.  

Me - I reported a High Balance on Discover this month because of Christmas - but I'll pay it off next month and let Amex carry over since it is at 0% interest for 12 months.  You have to do what is best for you.