What is better for your credit score?

[Anonymous]

To have 1 credit card with a balance that is at 90% utilization

or 3 credit cards with a 30%  utilization each?

I'm trying to increase my score all the while paying my debt down

Thanks!!

[SouthJamaica]

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@Anonymous wrote:

To have 1 credit card with a balance that is at 90% utilization

or 3 credit cards with a 30%  utilization each?

I'm trying to increase my score all the while paying my debt down

Thanks!!

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 3 with 30% each would be much better, but 3 with 29% each would be even better since 30% is believed to be a threshold

[Anonymous]

It also depends on aggregate utilization.

Using your example of having 3 cards... say the limits on the cards are $500, $1000 and $5000.  If you report 30% utilization on all 3, naturally your aggregate utilization will be 30%.

Now, if you report 0 on the two higher limit cards but 90% on the $500 card, your aggregate utilization is 7%.

If you report 0 on the two lower limit cards but 90% on the $5000 card, your aggregate utilization is then 69%.

I've always believed that aggregate utilization carries more weight than individual card utilization (although that DOES matter) so I'd believe scores to be highest in this example if 90% was reported on the single card with the smallest limit as aggregate utilization would be the lowest, even with taking a ding on one card reporting so high.  I would think that score would edge out 30% reported across all 3 cards, but as with everything it could very from profile to profile.

[Anonymous]

What if two cards reported 29% with the third reporting 32%. I would think having two cards below the 30% threshold would be better score wise than all at 30%

[Anonymous]

ohhh I didnt even think of that!  You are sooo right!

Thanks!

[Anonymous]

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@Anonymous wrote:

What if two cards reported 29% with the third reporting 32%. I would think having two cards below the 30% threshold would be better score wise than all at 30%

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This is true, but still aggregate utilization needs to be considered.  If the two cards reporting 29% are small limit cards and the 3rd card reporting 32% is a larger limit card utilization could still be 30%+.  Two $500 cards and one $5000 card using this example would net aggregate utilization at 31%

[Anonymous]

I guess without further information all we can do is use hypotheticals. Whatever the situation I always recommend going with the lowest interest gain.

[Thomas_Thumb]

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@Anonymous wrote:

To have 1 credit card with a balance that is at 90% utilization

or 3 credit cards with a 30%  utilization each?

I'm trying to increase my score all the while paying my debt down

Thanks!!

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Neither of the options you mention is optimal.

Fico looks at 3 factors relative to revolving credit. They are:

1) aggregate utilization (this carries the most weight) - 30% is an important milestone for this so you really want to get below that (or 29% to be safe)

2) Number/% of cards reporting a balance (100% reporting balances if you have 3 or more cards typically drops score)

3) Utilization on individual credit cards (really not much to worry about here until you cross above 50%. Also, max out is 90% and you can take a big hit for this.

So if you have 3 cards all with the same CL then I would go with 45% each on two cards and no balance on the 3rd card.

[SouthJamaica]

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@Thomas_Thumb wrote:

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@Anonymous wrote:

To have 1 credit card with a balance that is at 90% utilization

or 3 credit cards with a 30%  utilization each?

I'm trying to increase my score all the while paying my debt down

Thanks!!

---

Neither of the options you mention is optimal.

Fico looks at 3 factors relative to revolving credit. They are:

1) aggregate utilization (this carries the most weight) - 30% is an important milestone for this so you really want to get below that (or 29% to be safe)

2) Number/% of cards reporting a balance (100% reporting balances if you have 3 or more cards typically drops score)

3) Utilization on individual credit cards (really not much to worry about here until you cross above 50%. Also, max out is 90% and you can take a big hit for this.

So if you have 3 cards all with the same CL then I would go with 45% each on two cards and no balance on the 3rd card.

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You're right. Good thinking.