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Help me understand

New Visitor

Help me understand

I don't really understand what is going on.  My Credit utliization is 3% and myFico says that is Very good?  why isn't it exceptional?   I see a 'balance increase' of like $90 across a credit limit of over $50,000 and my score goes does like 7 points.  Any input? (all other categories- are strong- no late payments, length of credit , etc)

 

6 REPLIES
Valued Contributor

Re: Help me understand

The small ding may have to do with the number of cards reporting balances. Or it could have to do with the utilization on an individual card.

 

FICO likes it when less than half of one's cards report balances, and it likes it the best when only one card reports a small balance. This can vary depending on profiles and bureaus, though. In my case, I have seven cards. Equifax will ding me by five points or so when a second card reports a small balance. The other two bureaus don't care.

 

Also, retail cards vs. major bank cards may make a difference. Experian will ding me if a retail card is the only one reporting a balance. The other two bureaus don't care. Again, that's based on my profile. Things could be different for someone else.

Community Leader
Senior Contributor

Re: Help me understand

How many credit cards do you have total?  And of these, how many were reporting a positive balance when you got the Very Good rating (rather than the Exceptional rating you expected?

New Visitor

Re: Help me understand

5 cards.  three with small balances. I pay them off completely every month. However, I use them often- so the day they take the cut for their rating I will always have a 'balance' but the balance is within the month I pay them off.

 

Super Contributor

Re: Help me understand


mrjimt wrote:

5 cards.  three with small balances. I pay them off completely every month. However, I use them often- so the day they take the cut for their rating I will always have a 'balance' but the balance is within the month I pay them off.

 


"Utilization" is computed as of the day the statement cuts. To optimize your credit card utilization, have 4 cards report a zero balance, with the 5th card reporting a balance of 29% or less of its limit.

FICO8 EQ 725 TU 750 EX 717 Total revolving credit 443500
Community Leader
Senior Contributor

Re: Help me understand


mrjimt wrote:

5 cards.  three with small balances. I pay them off completely every month. However, I use them often- so the day they take the cut for their rating I will always have a 'balance' but the balance is within the month I pay them off.

 


You are getting a Very Good rather than an Exceptional rating from your credit monitoring product because most of your credit cards are showing a positive balance.  FICO cares about that along with % utilization.

 

The good news is that you can just wait until you really need those extra points.  Then, 45 days before that important application for credit, do what SouthJ suggested.  Get 4 out of your 5 cards reporting $0 with the remaining card reporting a small balance.

Highlighted
Valued Contributor

Re: Help me understand


CreditGuyInDixie wrote:

mrjimt wrote:

5 cards.  three with small balances. I pay them off completely every month. However, I use them often- so the day they take the cut for their rating I will always have a 'balance' but the balance is within the month I pay them off.

 


You are getting a Very Good rather than an Exceptional rating from your credit monitoring product because most of your credit cards are showing a positive balance.  FICO cares about that along with % utilization.

 

The good news is that you can just wait until you really need those extra points.  Then, 45 days before that important application for credit, do what SouthJ suggested.  Get 4 out of your 5 cards reporting $0 with the remaining card reporting a small balance.


I get the very good rating from time to time as well although my aggregate utilization is always below 6%. The drop from Excellent/Exceptional does appear to relate to #/% of cards reporting.

 

The rating categories come from a 3rd party system that was developed quite some time ago. It is a holdover from older Fico models were more sensitive to #/% of cards reporting than is Fico 8. I don't see a significant impact on Fico 8 score associated with # cards reporting balances. The critical component (for Fico 8 inparticular) is utilization. Of course, the older Fico models are still used for mortgage decisioning.

Fico 8: .......EQ 850 TU 850 EX 850 (3/2017)
Fico 9: .......EQ 850 TU 850 EX 850 (3/2017)
Fico 4 .....:. EQ 804 TU 823 EX 830 (3/2017) EX Fico 98: 839 (3/2017)
VS 3.0:...... EQ 832 TU 832 EX 832 (3/2017)
Fico 8 BC:. EQ 887 TU 899 EX 900 (3/2017)
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950 (4/2017)