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Utilization calculation question

When calculating utilization, need I worry about each individual card or just about my total utilization?

For the sake of illustration, let's say I have three cards (A, B, and C) each with a \$10,000 limit for a total limit of \$30,000 spread across all three cards. Card A has a \$0.00 balance, Card B has a \$0.00 balance, and Card C has a \$3,000 balance.  My total utilization at that point is only 10 percent, which I know is good, but my individual utilizations are 0 percent (Card A and Card B) and 30 percent (Card C), which seems not so good.

So what counts? The 10 percent total utilization or the 0 percent, 0 percent, 30 percent individual utilizations?

Also, relatedly, I have an old card I don't like to use since it has no rewards. But I don't want to get rid of it since it's by far my oldest card. Would it be better for me to make a small purchase on it every month and pay it off after the statement closes (thus avoiding literally 0 percent utilization) instead of not using it at all?

And finally, again relatedly, if 0 percent utilization is considered bad and 1 percent is considered good, is it really anything above 0 percent that is good? In other words, if a card has a \$10,000 limit and the statement closes with a balance of \$1 (0.01 percent utilization) is that significantly better than closing at 0 percent?

Sorry for all the questions. I appreciate any help you guys can offer.

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4 REPLIES
Valued Contributor

Re: Utilization calculation question

Both overall utilization and individual utilization are considered, and maxing individual cards is a no-no.

For optimum scoring, you want to let one card report a small balance, with others at \$0.

You can keep a card open by making a small purchase every few months and then paying off the card immediately.

Message 2 of 5
Valued Contributor

Re: Utilization calculation question

nycyclone9 wrote:

When calculating utilization, need I worry about each individual card or just about my total utilization?

Both, but the greatest benefit is from total utilization.  Having a maxed out card, though, will do some damage.

For the sake of illustration, let's say I have three cards (A, B, and C) each with a \$10,000 limit for a total limit of \$30,000 spread across all three cards. Card A has a \$0.00 balance, Card B has a \$0.00 balance, and Card C has a \$3,000 balance.  My total utilization at that point is only 10 percent, which I know is good, but my individual utilizations are 0 percent (Card A and Card B) and 30 percent (Card C), which seems not so good.

This is a good way to do it if you were unable to get that \$3k any lower.

Also, relatedly, I have an old card I don't like to use since it has no rewards. But I don't want to get rid of it since it's by far my oldest card. Would it be better for me to make a small purchase on it every month and pay it off after the statement closes (thus avoiding literally 0 percent utilization) instead of not using it at all?

The benefit of an older card is AAoA (average age of accounts). But AAoA is calculated on closed accounts as well, so if you did close this useless card it would still stay on your report for 10 more years and continue to age and help your overall average age of accounts. If the credit limit doesn't significantly help your overall utilization, it might be better off closing. If it was mine, I would close it. But yes, you can keep it alive with occasional small transactions. Just remember to pay it and monitor the account occasionally to make sure that there are no unauthorized transactions or charges you didn't expect.

And finally, again relatedly, if 0 percent utilization is considered bad and 1 percent is considered good, is it really anything above 0 percent that is good? In other words, if a card has a \$10,000 limit and the statement closes with a balance of \$1 (0.01 percent utilization) is that significantly better than closing at 0 percent?

0 percent on all cards appears as though you are not using your credit.  FICO penalizes for this as it could mean that you don't have much experience with revolving blances.  Utilization rounds up though, so 0.01% used = 1% FICO utilization. So you are showing use of credit and have an extremely low utilization.  I find the magic number for me to be less than 10%.  Some people notice more gains with even lower utilization, but IME, I have the same score with anything below 10%.  It may depend on the individual credit profile though.

EX:694 TU:744 EQ:777
Amex ED \$19.5k - BoA Travel Rewards \$15k - CSP \$5k - SDFCU EMV \$15k - NFCU goRewards \$20k - Barclays Arrival \$6.5k
Message 3 of 5
Member

Re: Utilization calculation question

So to clarify, when you say FICO penalizes for 0 percent utilization, that's 0 percent total utilization, right? In other words, it in no way hurts a credit score to have a card at 0 percent utilization as long as ALL cards are not at 0 percent?

Message 4 of 5
Valued Contributor

Re: Utilization calculation question

Yes, that is correct.

EX:694 TU:744 EQ:777
Amex ED \$19.5k - BoA Travel Rewards \$15k - CSP \$5k - SDFCU EMV \$15k - NFCU goRewards \$20k - Barclays Arrival \$6.5k
Message 5 of 5