Utilization percentage - of the one card or total?

[jamie123]

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@joshall wrote:

I have also always asked this question.  Here is my take on all this:

(1) Speaking from true experience:  If you spend all on one card, but keep total balance of all card less than 10%, you will get dinged on your report as 'ratio of balance on a revolving account too high'.

(2) But if you put 5% on two cards, each, then you might get dinged by 'too many accounts with balances'. I guess this is also depending on how many cards you have. If you have only two cards, then this is not a good idea. But if you have 10 cards, putting balances on 2 out of 10 cards does not seem too bad.

(3) Established bloggers here have mentioned the way to maintain high credit scores is to put <10% on one card, but keep other cards at 0.  This is a highly arguable fact, though.

So the solution? To play it safe, opt for putting < 10% only on one card.

I would love to hear opinion from the others!

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Well....The answer is...It depends...

I think that FICO 08 scores credit card UTI a bit different than FICO 04 does.

Back when MyFICO was using FICO 04 to determine scores the rule was: One card reporting less than 10% of your COMBINED credit card credit lines and all other credit cards report $0. This rule was tested many times and found to be very accurate.

Since MyFICO moved to FICO 08 to determine scores the old rule doesn't seem to work as well. FICO 08 is a scoring model that is more specific in determining credit worthiness for issuing new credit cards and so treats credit cards differently than FICO 04. FICO 08 doesn't seem to have one rule that works best for everyone. It seems that most people need to use this rule: One card reporting less than 10% of the one card's credit line and all other cards reporting $0.

The 08 rule doesn't seem to work in ALL instances though and it probably depends on other factors on the report. Some people get away with more than 10% of the one card's CL reporting and can go much higher percentage wise without seeing a score drop. Other people can actually have 2 or 3 cards report a small balance without seeing a drop. I have yet to see a reporting rule for FICO 08 that works for everyone.

[vanillabean]

If you're in a two seater rowboat in the middle of the Pacific Ocean and encounter a series of fifty foot waves, how much would your paddling amount to? That’s the utilization rule for FICO 08 that applies to everyone. Keep your cards reporting a balance to fewer than half, after which the rest matters little.

[Anonymous]

I'm gonna try this on my next report, gonna put 2 cards at 0%, 2 at under 5% and 1 at around 10-15 and see what happens.

[NRB525]

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@Anonymous wrote:
I'm gonna try this on my next report, gonna put 2 cards at 0%, 2 at under 5% and 1 at around 10-15 and see what happens.

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Okay, Fine, however...

You have to let the score stabilize with that pattern to really see what the result would be. The first time things move around, to a setup like that, you will see noise in the calculation, so you have to be patient and let the calculations get used to the new setup.

In my opinion, any pattern that is consistent will provide nearly optimized score for the cardholder, given any set level of utilization along with a stable credit file (no new apping, baddies, etc). So low utilization on all cards, if left at that lower level, should stabilize within a few points of "all cards report zero, one at 9%".

[masscredit]

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.

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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?

[NRB525]

masscredit, Are you rebuilding from some negatives in your file? With the amount of credit you have and being below 700, do you have lates or something on your report? Just trying to get a better understanding of what is influencing your scores.

Thanks

[masscredit]

I have a BK that was filed in 2009, discharged Feb of '10. Also have 3 IRS tax liens and two state liens. The two from the state were paid off the end of last year. They updated a few weeks ago. TU actually deleted them along with four IIB accounts that were due to fall off. Two more will fall off in June and the lst one in August.  My reports currently look like this -

EX - 8 Baddies / 5 Public Records (state liens marked released)

TU - 3 Baddies / 4 Public Records (one state lien deleted and one marked released)

EQ - 5 Baddies / 4 Public Records (one state lien deleted and one marked released)

A couple of the IRS liens don't report on all of the reports. 

EX and EQ deletes IIB accounts later than TU so I'll have to wait a few months for some of those to fall off. 

[NRB525]

Ok, thanks for the details. I bet you can't wait to get further down the calendar to get rid of those.

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.

[masscredit]

Thanks for the info!  I kind of forgot that baddies stay on our reports for 7 years. Remembered that towards the end of last year and was even happier to find that the CRAs will delete them earlier (TU the earliest).  It was like being teleported to the future! 

I believe some credit reports show high balances even if they aren't the statement balance. I was looking for that as I looked through my reports a few weeks ago. One of my accounts had a high balance of $5500 a few months ago but closed at $0.00. It showed the high balance. 

[gdale6]

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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.