Transunion drop

[Anonymous]

Hello. New to these forums so maybe this has been discussed many times but I didn't see it. Received a notification yesterday that my TU score dropped 12 points due to a change in the sum of my credit cards. I was reported as having a $0.00 balance and that change dropped me 12 points? I called My Fico and the customer service rep advised me it is considered a negative to carry a $0.00 balance? Anyone else experience something like this?

[Anonymous]

Yep, you need to follow the AZEO rules.  Type AZEO into the searchbar here.  Do AZEO every month.

AZEO means "All Zero Except One"

It means ALL credit cards will be reporting $0 balance on your credit reports, except one credit card which must report at least $3 and no more than 8.9%.  So if you have a card with a $1000 credit limit, report anywhere between $3 and $89.  On one card.  All the others at zero.

I killed my FICOs by 20 points this month by paying all to zero.

If you only have 1 card, you really want 3 cards for the best FICO score boost from credit card portion.

[Anonymous]

Thank you. I have 4 cards. A chase Marriott with 5k a chase southwest with 2k and two Capitol ones with 6300 and 2k. I am currently not carrying a balance on any of them. I guess I should keep about 750 to 1k on them, as that would but me at about 5-7% utilization

[Anonymous]

You only want 1-9% of utilization on that one card.  So if you have a $5000 credit limit, you want to post a balance of between $50 and say $400.  Then pay it off after it reports so you aren't charged interest at all.

If you post a $1000 balance on a $5000 card, you'll report 20% utilization which is not as good as <9% but above $0 on one card.

[Anonymous]

Between my 4 cards I have 15,300 in available credit. Is the utilization determined as a percentage per card or by the total sum of the available credit?

[medicgrrl]

Both

[Thomas_Thumb]

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@Anonymous wrote:
Between my 4 cards I have 15,300 in available credit. Is the utilization determined as a percentage per card or by the total sum of the available credit?

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Revolving utilization is looked at in aggregate (all cards combined) and on an individual card basis. Aggregate utilization is weighed more heavily than individual card utilization in Fico scoring. Also, the scoring algorithm basically looks at which of the individual cards has the highest utilization uses that to rate credit management of individual cards. A 3rd factor relating to score is how many open accounts (or % of open accounts) are reporting a balance.

As a general rule for best results:

1) Maintain aggregate utilization under 9%

2) For any cards that do report a balance, have individual card utilization report under 29%

3) Do not report $0 balance on all cards (can drop score 20 points if you do).  Don't report balances on more than 50% of your cards - unless you only have one card, then it is best to have that card report a small balance (under 9% UT) than to report a zero balance.

In your case, you may see a slight boost in score by reporting a balance on one card only vs small balances on 2 cards. My guess is one card vs 2 cards reporting might gain you 5 points. However, if we are talking about TU, you might not see any score drop with two cards reporting. On the flip side, reporting balances on 3 cards vs 2 cards could cost 10 points. If all four cards report balances - even if they are small dollar amounts - score drop relative to one card reporting could reach 20 points (particularly if a profile is thin/young0.

From what I have seen on Fico 04 Equifax started dropping my score when # cards reporting went from 3 of 6 to 4 of 6 (50% to 67%), TransUnion didn't start dropping my score until I went from 4 of 6 to 5 of 6 (67% to 84%). Experian didn't drop score intil going from 5 of 6 to 6 of 6 reporting (84% to 100%).

[Anonymous]

Thank you for the response. This is all very informative. What my plan will be is to keep about 350 a month on my Marriott card and about 125 on my Southwest card. That way I am staying at 5% utilization in aggregate and under 8.9% on any one card.

[Thomas_Thumb]

Please note: 

You don't need to "keep" balances on cards - just let a balance report and then pay the balance in full (PIF) before the due date.

The PIF approach avoids recurring interest charges.

[HeavenOhio]

Putting it another way, your statement balance should come from new charges. Always pay the previous month's statement balance in full.

You don't need to do AZEO every month unless you have an important application coming up. However, it might be useful to try it just to see how high your score will get. After that, try leaving balances on two cards to see how much it might matter. Another month, you could try a slightly larger balance. Don't change up too much at once. There'll be too many variables involved and the effects of your experimenting will be obscured.