Optimal FICO Score - Utilization Assumption and Questions

[s_haliz]

It is discussed here many times and so I am assuming that it is true: 

"If you have multiple cards (say 5, 6, 7,...) keep balance on all but one to $0.00. The balance on that one card should be 1%"

Now here are my questions:

1. Let say if you have a tiny balance of say $4 on a credit card with limit of say $50,000, does FICO rounds up that 0.008% to 1% or 0.00% for utilization purpose?
2. Let say if you have a balance of $50 on a credit card with limit of say $20,000, does FICO rounds up that 0.25% to 1% or round up 0.00% for utilization purpose?
3. Would you carry balance on that one credit card (1%) to your highest credit limit card or to your lowest credit limit card?
4. If the answer to question 3 is lowest, and if you have three credit cards with lowest credit limit, is it recommended to keep the balance of 1% on the same card month after month, or needs to rotate the balance on different card each month?

Appreciate your response.   

 

[jamie123]

You only need to do this when you want to groom your credit so you can find out just how high you can get your scores OR are planning to apply for NEW credit in the next month and need your scores as high as possible.

To get your highest FICO scores the balance on one card should be 9% or lower. Some people find that they get their highest scores at 4% or 5% or 6%. It really depends on each person's report and history. You might not get your highest scores at 1%. (EDIT: The difference in points with between 1% and 9% reporting is very small and usually only die hard FICO scorers are concerned about it. It might be at most 3 to 5 points.)

To answer your questions...

1. FICO would round up because it is not zero.

2. FICO would round up because it is not zero.

3. It doesn't matter.

4. It would be best to rotate amongst your cards otherwise they will be listed as inactive cards on FICO after a while.

I personally think it is best to use a few cards every month and let them report the balances of your normal utilitazion. Rotate between your cards every month or so so that all your cards get to report balances occasionally. This will build good history with all your cards. Some creditors will stop reporting zero balances to the CRAs after just a month or two and the cards will look inactive to the CRAs.

Then, when you need to apply for new credit next month, groom your scores like you mentioned above. One card less than 10% and the rest $0.

[s_haliz]

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@jamie123 wrote:

You only need to do this when you want to groom your credit so you can find out just how high you can get your scores OR are planning to apply for NEW credit in the next month and need your scores as high as possible.

To get your highest FICO scores the balance on one card should be 9% or lower. Some people find that they get their highest scores at 4% or 5% or 6%. It really depends on each person's report and history. You might not get your highest scores at 1%. (EDIT: The difference in points with between 1% and 9% reporting is very small and usually only die hard FICO scorers are concerned about it. It might be at most 3 to 5 points.)

To answer your questions...

1. FICO would round up because it is not zero.

2. FICO would round up because it is not zero.

3. It doesn't matter.

4. It would be best to rotate amongst your cards otherwise they will be listed as inactive cards on FICO after a while.

I personally think it is best to use a few cards every month and let them report the balances of your normal utilitazion. Rotate between your cards every month or so so that all your cards get to report balances occasionally. This will build good history with all your cards. Some creditors will stop reporting zero balances to the CRAs after just a month or two and the cards will look inactive to the CRAs.

Then, when you need to apply for new credit next month, groom your scores like you mentioned above. One card less than 10% and the rest $0.

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Thank you for your response. Great tips. In addition to apply for a new credit card, the grooming of scores I had explained (and you had validated) should also help for asking CLIs, specifically like 3XCLI to AMEX.