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Decrease utility

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907grown
Established Contributor

Decrease utility

So, I am paying off my three credit cards all at once, I have a 120% utilization, I am going to take it down to 3% owed on each card.  My score is low, sub 500, how do you think this impact my score?  20 points, 50 points, no way of telling?  I was approved for a new car recently, the loan was added and dropped my score by 3 points.  I am so lost with this.  I NEED to buy a house in 1 year.  The mortgage lender says oh just give it 6-12 months of ontime payments, currently I have been on time for over 12 months, any words of encouragement?


Starting Score: 460
Current Score: EQ 764, TU 764, EX 740,
BOA AK AIR 30,000, Discover IT 6300, Freedom 25,300, Barclays RMC 15,660, Ring 15,000, BCE 15,000, QS17,000,AARP 15,000, ChaseFU 8,000,AND A LOT MORE!
Message 1 of 6
5 REPLIES 5
llecs
Moderator Emeritus

Re: Decrease utility

New accounts will usually drop your score. It'll slowly rebound over the next year. Installment utilization is such a minor part in scoring.

 

Utilization is HUGE per scoring. If these 3 are paid down, you'll see large gains. Ideally, you'd want 2 of them to report $0 with the remaining to report less than 9%. 3% is just fine. If these 3 consist of a good mix (e.g. revolving and a charge) then I'd venture a guess of 100-120 points gained if they report exactly $0, $0, and 3%. If these are all revolving or all charge, then I'd lower my estimate and say 90-110. And this is assuming nothing else changes to your reports between now and then.

 

Your cards are very much maxed. Because they are maxed, FICO is dinging you extra. I accidentally let a CC report a huge balance beyond the CL. There was an extra 20 point or so ding for doing that.

Message 2 of 6
creditwherecreditisdue
Senior Contributor

Re: Decrease utility

UTIL > 100% is crushing. Doing your best to get that down ASAP will work wonders for your scores!

 

The car loan is a plus. Within six months you will have your three point and more back!

Message 3 of 6
jackg
Established Contributor

Re: Decrease utility

When trying to optimize your score in the segment called "Amounts Owed" (30% of FICO score) paying your utilization down to 3% is correct but the other part of that is to not  let a balance due to be reported on more than 50% of all your accts. So, in your case it looks like you have 1 installment acct. and 3 revolving accts. for a total of 4. The car loan will report a balance due until it's paid off so thats one. Which means you can only have a balance due on one of your credit cards, if you want to optimize your score in that segment. The other thing you can do is add a mortgage which as you said is your goal so I think you're doing all the right things. Now you just have to have patience and let all accts, age.

 

Good Luck

FICO scores on November 17, 2014 (prior to applying for and being approved my mortgage)

EX=738
EQ=735
TU=754

FICO scores on March 4, 2015 after being approved for mortgage and buying the home, the mortgage isn't yet reporting.
EX- 689 EQ- 739 TU- 739
Message 4 of 6
creditwherecreditisdue
Senior Contributor

Re: Decrease utility

Of course that reporting mortgage will count as a TL with a balance effecting the number of other accounts that can report balances.

 

Optimal credit utilization for FICO scoring purposes is:

  • Total revolving utilization > 0 and <= 9%, the lower the better, and
  • Reporting a balance on less than half of your revolving TL's, and
  • Reporting a balance on half or less of all TL's.

 

Anyway you get there is fair game. You only need have one revolving TL report a balance.

Message 5 of 6
RobertEG
Legendary Contributor

Re: Decrease utility

Having a maxed out card is a substantial hit on FICO.  Going over 100% is also I violation of the terms of your account with the OC, and will probably also result in increased interest rates, and may lead to a drop in your credit limit, and possibly cancellation of the account.

Never max a CC.

Message 6 of 6
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