Utilization percentage - of the one card or total?

[NRB525]

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@gdale6 wrote:

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@masscredit wrote:

Something that I read in a credit improvement e-mail that came in from credit.com this morning  -

Good credit is about more than just paying bills on time. About 30% of your credit score is based on your amount of debt, which includes your credit utilization. That’s the ratio of how much you owe on your credit lines divided by the total credit limit of those lines. For example, if you have total credit lines of $40,000, and you have a total outstanding balance of $10,000, your credit utilization ratio is 25% ($10,000 divided by $40,000).

If that ratio exceeds 30%, it can have a negative impact on your credit score. If you are casual about your credit balances, they can slowly creep up to 40%, 50%, 60% or more. At that point, you may see your credit scores begin to sink.

>>

So they're saying it's the amount of all credit limits combined. Or, we fine tune it down to one card to keep it even lower?

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Fico calculates your utilization in multiple ways, on the sum of the total credit available and total amount used, cards individually and more than 30% is going to give you a ding increasing with increased percentage used and it calculates on the total number of cards with balances, doesnt matter if the balance is $1 or $1K the ding is the same.

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It may be a ding, but it doesn't have to be a large ding.

I made a BT to a $1k card, it just reported this week, 72% utilization on that card, $720, which appears as a total increase in borrowing because the source card has not reduced by that amount yet.

Lost 1 point on EX, 4 points on TU, and zero points on EQ, because EQ was already beaten down by other things.

I have my doubts as to the weight of individual cards utilization, or even reporting, on the overall calculation. Overall utilization, of all cards in total, definitely. Individual cards? maybe not so much.

[tiger_uppercut]

Oh, that is awesome. I can't wait.

I just got my util down to 5% from 73% and am hoping for a nice boost. Also impatient as hell.

[masscredit]

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@NRB525 wrote:

If I were you? I'd not worry about the one card reporting thing. As you are rebuilding, you are going to get your biggest score boost when those are behind you. Until then, I would use the cards in a PIF mode, and let those CCC see your good payment activity. My opinion is that letting those cards report balances is going to look better on your CR later, when you want other CCC to see your payment history. If you pay before statement, CapOne and Barclay may see the activity, it is unlikely others will see that on your CR.

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Adding to what you said earlier, my credit union pretty much told me the same thing this afternoon. We were reviewing my credit report when she pointed out that I don't have many accounts that actually report a balance. I told her that I usually just let one card report. She suggested at least rotating cards that report so they show useages and being paid on as agreed. If not, my baddies from before can outnumber the cards that are actively in good standing. I never really thought much about that until you mentioned it and she reinforced it. She also suggested that it can just be a small balance like $5 or $10.  Doesn't have to be a large amount. 

[jamie123]

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@masscredit wrote:

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@NRB525 wrote:

If I were you? I'd not worry about the one card reporting thing. As you are rebuilding, you are going to get your biggest score boost when those are behind you. Until then, I would use the cards in a PIF mode, and let those CCC see your good payment activity. My opinion is that letting those cards report balances is going to look better on your CR later, when you want other CCC to see your payment history. If you pay before statement, CapOne and Barclay may see the activity, it is unlikely others will see that on your CR.

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Adding to what you said earlier, my credit union pretty much told me the same thing this afternoon. We were reviewing my credit report when she pointed out that I don't have many accounts that actually report a balance. I told her that I usually just let one card report. She suggested at least rotating cards that report so they show useages and being paid on as agreed. If not, my baddies from before can outnumber the cards that are actively in good standing. I never really thought much about that until you mentioned it and she reinforced it. She also suggested that it can just be a small balance like $5 or $10.  Doesn't have to be a large amount. 

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Yeah, I totally agree with letting all your cards report a small balance every month unless you plan on applying for NEW credit. When you do the whole 1 card less than 10% thing and keep your scores groomed every month, I don't think that you build history as well as just using your cards and letting them report.

You want as many good marks as you can get from making monthly payments. That's why like on Credit Karma they have the "Percentage of On Time Payments" category. You want to eventually drown out any baddies with good payment marks. You don't get a "Good Mark" if your reported balance is $0.

[masscredit]

So you give up some points to get good marks by letting balances report? Does it matter how much reports? Can it be something small like $5.00 or should it be a normal use amount?  There have been times when I needed to apply for credit that wasn't planned for so I was glad that I always have my scores groomed to be their best.  Plus, after rebuilding, I find it hard to give up any points. I've been turning over rocks searching for any points that I can add.

[NRB525]

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@masscredit wrote:

So you give up some points to get good marks by letting balances report? Does it matter how much reports? Can it be something small like $5.00 or should it be a normal use amount?  There have been times when I needed to apply for credit that wasn't planned for so I was glad that I always have my scores groomed to be their best.  Plus, after rebuilding, I find it hard to give up any points. I've been turning over rocks searching for any points that I can add.

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Well, for starters, I would not let the JCP, Walmart, or Target cards report anything unless it was something you really had to buy.

As for letting normal spend report on a PIF card, if you let that happen for a few months, I think you will see your score stabilize anyway at about the level you are already at. So I don't consider it giving up any points, the key is to stabilize that balances profile. I really think the main driver is payments on time and overall utilization, not individual card utilization if those cards are used consistently.

For example, I got both the Marriott and Hyatt cards recently. Routed regular spending through them to get the bonus, and now I use them for dining only, will use them when I go to those hotels. For the April report, they are $44 and $32 balances, because I don't eat out much. Freedom takes groceries for now, but once I start routing spend through my Discover, each of Marriott, Hyatt, and Freedom will probably get $10 in charges each month. If a card reaches zero, I'll take it out to use it for a gas fill up ($40) a cafeteria bill ($5) or a grocery day ($20) or if it has a good BT offer, load some of my balances on it so I don't have to worry at all for a few months. Because I rarely let a card go to zero, there's no subsequent penalty for the card to go from the $0 to a small balance, it already has a balance.

You can try to manage your cards with only one reporting. That may indeed get you a few extra points. My argument is, is it really worth the effort to do that, and can you quantify how many extra points you might be getting? I also think, if you have a card, why is it not being used, even for PIF spend? why have the card at all?

[masscredit]

I see what your saying.  Something that I've wondered is if the one card that I have report usually has $400-$500. and then it has a balance of $900. would I lose points because $400.- $500 has become the norm for that card?  Kind of along the lines of what you said about stablizing the balances profile. 

I haven't found it to be much work to have cards paid off before the statements close. I have all of the dates memorized so I know what to make a payment and not to use that card until the statement closes. I think I've just got used to doing it so it's a way of life now. i'm going to try letting balances report to the other cards so they can show a payment history. I think it will take an effort to do that over paying them before the statements close.  

Any reason to not let a balance report on Walmart, JPC or Target? 

[NRB525]

The WalMart, JCP and Target comment is only; if you have no reason to go to that store in a given month, don't make a charge just to get a balance. If you do have a reason for the purchase, then it would be a card that would be OK to report, in my opinion.

Store cards, like JCP, likely are SD for a while on a regular basis.

Target and Walmart? You may shop there and it is a non-issue that they report balances, it's just normal spend.

[jamie123]

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@NRB525 wrote:

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@masscredit wrote:

So you give up some points to get good marks by letting balances report? Does it matter how much reports? Can it be something small like $5.00 or should it be a normal use amount?  There have been times when I needed to apply for credit that wasn't planned for so I was glad that I always have my scores groomed to be their best.  Plus, after rebuilding, I find it hard to give up any points. I've been turning over rocks searching for any points that I can add.

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Well, for starters, I would not let the JCP, Walmart, or Target cards report anything unless it was something you really had to buy.

As for letting normal spend report on a PIF card, if you let that happen for a few months, I think you will see your score stabilize anyway at about the level you are already at. So I don't consider it giving up any points, the key is to stabilize that balances profile. I really think the main driver is payments on time and overall utilization, not individual card utilization if those cards are used consistently.

For example, I got both the Marriott and Hyatt cards recently. Routed regular spending through them to get the bonus, and now I use them for dining only, will use them when I go to those hotels. For the April report, they are $44 and $32 balances, because I don't eat out much. Freedom takes groceries for now, but once I start routing spend through my Discover, each of Marriott, Hyatt, and Freedom will probably get $10 in charges each month. If a card reaches zero, I'll take it out to use it for a gas fill up ($40) a cafeteria bill ($5) or a grocery day ($20) or if it has a good BT offer, load some of my balances on it so I don't have to worry at all for a few months. Because I rarely let a card go to zero, there's no subsequent penalty for the card to go from the $0 to a small balance, it already has a balance.

You can try to manage your cards with only one reporting. That may indeed get you a few extra points. My argument is, is it really worth the effort to do that, and can you quantify how many extra points you might be getting? I also think, if you have a card, why is it not being used, even for PIF spend? why have the card at all?

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I disagree with the statement that I highlighted in red above. Your score will never stabilize at a higher score with higher UTI. You will always be able to raise your score to the highest it can be by doing the 1 card less than 10% and all the rest $0.

Your scores will drop by letting all your cards report a small balance but it is the price we have to pay to build better history. If you have halfway decent scores to start with, we are talking about 10 to 20 point drop with all cards reporting but you build much better history.

The way that I do it is to use one primary card a month for most of my purchases and maybe put one small purchase on the other cards. I don't go out of my way to do it but say, when I am filling my car with gas, that purchase will go on one card and be the only purchase on that card that month. When I buy lunch, I will use another card for that purchase and let that report. I will rotate which card that I use as my primary card every few months. I have one card that I use specifically for all my subscriptions like MyFICO, Netflix and my cell phone bill. I very rarely use that card for anything else.

You gain all the points back as soon as you groom the reporting back to 1 card less than 10% but now you also set yourself up for better and auto CLIs. Some CCC won't give you CLIs unless you have reported balances for the previous few months. (Walmart)

EDIT: I also control the reporting balance of that month's primary card by paying the balance down before the due date if it gets too high for my liking.

[NRB525]

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@jamie123 wrote:

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@NRB525 wrote:

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Well, for starters, I would not let the JCP, Walmart, or Target cards report anything unless it was something you really had to buy.

As for letting normal spend report on a PIF card, if you let that happen for a few months, I think you will see your score stabilize anyway at about the level you are already at. So I don't consider it giving up any points, the key is to stabilize that balances profile. I really think the main driver is payments on time and overall utilization, not individual card utilization if those cards are used consistently.

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I disagree with the statement that I highlighted in red above. Your score will never stabilize at a higher score with higher UTI. You will always be able to raise your score to the highest it can be by doing the 1 card less than 10% and all the rest $0.

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I don't think we are disagreeing fundamentally, but it is important to be understanding terminology.

If total utilization on all cards goes up, because the cardholder keeps the same dollar amount reporting on one card and then adds  dollar amounts to the other cards, yes, the score will go down because total utilization has gone up.

If more cards are allowed to report, and total utilization, the sum of all card open balances, does not change, this is where I think that amount of total utilization, where it lands on individual cards, will make very little difference, once the cards are on this total utilization for a while. Part of my assumption is that cards are not going in and out of $0 balances, they constantly report some amount.

As to "Always raise your score by using all cards zero, one at 1% to 9%", in order to prove this, you must maintain the same total dollar amount outstanding, not reduce the total dollar amount outstanding by just zeroing the other cards and keeping the one card at the same amount. This is where I think people get confused: In the act of getting to that one card reporting, the real impact is; total amounts outstanding are also declining, which raises the score. Separating out whether that was because one card reports, or total amounts outstanding declined, is the challenge. I think the most impact is because total amounts have declined, not the one card only reporting.

People trying to optimize score are in the act of driving down open balances. That is the action that is improving their score.