Understanding FICO® Scoring

[gerry1945]

My wife currently has one credit card with a $20K limit on which she owes about $13K.  She has another one with a balance of about $11K that has been closed at her request because the company tried to increase her interest rate on a life-of-balance offer (by rejecting it, she was allowed to pay the account on the old terms).  She also has a number of other cards reporting (credit limits totalling perhaps $100K) that she either doesn't use at all or pays every month.  We have both a first mortgage and a HELOC jointly.  EVERYTHING is and always has been paid on time for as far back as either of our credit reports go.

Because she has her own business, her FICO score is important when obtaining credit.  So the question is what is the ideal mix of balances across her cards.  Recently, I read an article on the web that utilizations over 75% were a big negative, but that zero-balance cards were ALSO a negative.  I'm not sure this is true, but if it is then she should be shuffling things around a bit.  But how, specifically?  Any help would be greatly appreciated.

[haulingthescoreup]

OK, the idea is (are?):
- total util at 9% or less
- ideally, individual card util at 9% or less, but not on all cards --most should report $0
- only one or two cards reporting balances at any given time (should be 9% or less); all the rest reporting $0

Several of us have found that in terms of scoring, we could get away with one card with high util, as long as overall util stayed low, and of course, this is easier to do with total CL in the $100K+ range.

My concern in this day and age would be other banks getting twitchy, seeing that one high util card. Banks are as skittish as race horses these days, and they'll shy away at just about anything, it appears.

She can use cards during the month and pay them off several days before the statement is due, so that they will report $0. Many people don't realize that if you wait for the statement, and then pay in full (as any sensible person would do), the balance on the statement gets reported and calculated in util.

Now that so many of us are trying to fly under the radar to avoid catching banks' attention, this is catching on.

[gbreadman]

Last year I was doing a lot of traveling for business, and buying hotel rooms on priceline ("name-your-own-price" is awesome, as long as you check-in the scheduled night, and you don't mind what brand of hotel you get).  All of the charges went on a Chase Visa because my goal was the $250 rebate check, and I had plenty of expenses (save up to $200 in cashback, and get a $250 check from Chase...which is a free $50).

Basically whenever my util got "high" (above 10%) I would lose 7 EQ points (I was around 800 at the time).  when it got around 25% util it would lose 14 points.  I'd pay it back next month, balance would go down, I'd gain the 7 points back.  It kept flipping and flopping like that every time I had a high util month (up 7, down 7, up down flip flop).  So I would say paying down a balance when you have a high FICO score is worth about 7 points.

Dan