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Which is better: 0% or 1% utilization?

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Anonymous
Not applicable

Which is better: 0% or 1% utilization?

As the topic asks... Is it better to have CCs but never use them (thereby carrying $0 balance, $0 payments, and 0% utilization), or is it better to maintain some utilization with timely payments to demonstrate credit-worthiness?
 
My situation:
I've had a $0 balance on all my CCs for almost a year now.  I simply never use them.  I also have no lines of credit, mortgage debt, or auto loans.  My only debt is student loans, which I make timely payments on.  I have good CC, LOC, and auto loan history, but it's mostly 3+ years old.
 
Like everyone else, I'm looking for ways to increase my score.  Specifically to get a better mortgage this Nov or Dec.  Seems like there's not much more I can do (except sit and wait).  All errors have been corrected, and the EQ score is still in the 680's -- I assume due to lack of lengthy credit history.
 
Does FICO want me to prove, somehow, that I can handle debt, by maintaining a small non-zero utilization on the CCs?
 
Does it help to pay off the student loans early?  I've paid off most of them within the last year, but it doesn't seem to make much impact on my score.  Mortgage inquiries in February (decided not to buy) and in July (again, decided not to buy) seem to have flattened any score benefits from paying off the loans.  Just stuck in the 680's, rising about 1 or 2 points per month.
 
I've considered asking the CCs for higher limits, but I'm afraid that will spur hard inquiries (whether I authorize them or not).  Besides, 0% utilization is 0%, no matter the limit, right?
 
Help appreciated.
Message 1 of 14
13 REPLIES 13
MidnightVoice
Super Contributor

Re: Which is better: 0% or 1% utilization?

One comment I get on the plus side sometimes is "you have shown recent use of credit cards".
 
You might want to run up a couple of balances (less than 10% of total available credit on your cards) and PIF them before charges accrue, but if you are aiming at December it might be a tight squeeze
The slide from grace is really more like gliding
And I've found the trick is not to stop the sliding
But to find a graceful way of staying slid
Message 2 of 14
Anonymous
Not applicable

Re: Which is better: 0% or 1% utilization?

I feel that a little utilization may help. I got as reasonable bump in my score when one of my cards went from $16 balance to a few hundred (11,000 limit on the card).

You can just try for one month. Have the card report a 4% balance or so, and PIF before due.
Message 3 of 14
smallfry
Senior Contributor

Re: Which is better: 0% or 1% utilization?

With no baddies you should be higher than 680. Use the cards.
Message 4 of 14
haulingthescoreup
Moderator Emerita

Re: Which is better: 0% or 1% utilization?


smallfry wrote: With no baddies you should be higher than 680. Use the cards.
Yep, FICO likes to see signs of life. Otherwise you will look like my terrified 19-year-old, with 2 cards/ $1500 total CL, and scared to use them. Well, you look better than that, but you get my drift. Smiley Happy
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 5 of 14
Anonymous
Not applicable

Re: Which is better: 0% or 1% utilization?

Thanks for the answers.  I'm surprised the scoring system is that "smart".
 
And, as for this comment:
 


haulingthescoreup wrote:
Yep, FICO likes to see signs of life. Otherwise you will look like my terrified 19-year-old, with 2 cards/ $1500 total CL, and scared to use them.

 
I'm not much different from your terrified 19-year-old!  I'm a slightly paranoid 28-year-old! Smiley Wink
Message 6 of 14
smallfry
Senior Contributor

Re: Which is better: 0% or 1% utilization?

Rule of thumb let 40% of your credit cards report a balance each month then pay in full before the due dates. Got 10 cards? Let 4 report. 5? Then let 2 report.
Message 7 of 14
fused
Moderator Emeritus

Re: Which is better: 0% or 1% utilization?

Hey smallfry it's our favorite topic again!Smiley Very Happy I am waiting to see what happens when 3 of my 6 revolving CCs report PIF.
Message 8 of 14
MidnightVoice
Super Contributor

Re: Which is better: 0% or 1% utilization?



fused wrote:
Hey smallfry it's our favorite topic again!Smiley Very Happy I am waiting to see what happens when 3 of my 6 revolving CCs report PIF.


 
In my experience - nothing  Smiley Sad
 
Then when one suddenly reports a balance, down 7 points.  When it next reports a higher balance - plus 11  Smiley Very Happy

 

Go figure


The slide from grace is really more like gliding
And I've found the trick is not to stop the sliding
But to find a graceful way of staying slid
Message 9 of 14
smallfry
Senior Contributor

Re: Which is better: 0% or 1% utilization?

Am I reading the post on the FICO slide show correctly or is 2 the optimum number of bankcards? Smiley Wink
Message 10 of 14
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