cc utilization ?

[jbee]

Ok, I need some help.  I have 3 cc with balances.

1.  Best Buy- 400 bal, 1150 cl (0% interest until next year)

2.  HSBC- 600 bal, 750 cl (80% utilization)

3.  WaMu- 1450 bal, 1500 cl  ( 97% utilization)

***Card 2 and 3 interest rates are about the same***

My question is.... I'm paying $800 next week towards the balances to get the utilization down.  Should I split it between amount between cards 2 and 3 or should I concentrate on the highest utilization first and then work on HSBC? 

Thanks

[Anonymous]

Hi jbee,

It's really up to you and what would make you feel more comfortable.  Usually i would try to pay one card out of three down to zero, so you have fewer cards reporting a balance; but given your high utilization, I would split it between cards 2 and 3.

If you put $200 on HSBC, it will bring that utilization down to 54%, and putting $600 on WaMu will bring that utilization down to 57%; bringing your overall utilization down to 49%.

My next step would be to pay an additional $30 on HSBC which brings it below 50%, and an additional $115 on WaMu will bring that one below 50%.  That should feel pretty good after coming down from a 97% utilization.  

Congrats on working those balances down!

[jbee]

Thanks Beam....

Actually, I have another card with a $0 balance, 400cl.  I think that's a good idea.  Do you think I will see a decent score increase if I can get both of these under 50%?

[fused]

beamMe's point about having all cards reporting less than 50% util is really key. Once that happens, you should really see an improvement in your scores. The problem is its very difficult to guess how many points you will gain, FICO scoring has many moving parts.

[jbee]

Thanks guys.  I will try that approach and get them under 50% this week and under 25-30% next month.  I'm applying for a mortgage at the beginning of August, so hopefully everything will be updated by then.

Do you think I should get Best Buy down a little more or is it not too bad right now?  I was planning on paying 30.00 each month, since it's interest free until next year.

Thanks again for your help.

[Anonymous]

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jbee wrote:  Do you think I should get Best Buy down a little more or is it not too bad right now?  I was planning on paying 30.00 each month, since it's interest free until next year.

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jbee,

For me, I would watch the utilization percentages on all three accounts.  When HSBC and Wamu approach the same percentage utilization as Best Buy, I would work on getting all three of them continuously lower. 

At that point, I would still consider paying off one completely, so you then have two cc's not reporting a balance - that's a FICO point maker.  The general consensus here is that FICO likes half or more of all of all open accounts not reporting a balance - that count includes mortgages and all else.

So if you have a mortgage and car payment plus four credit cards (six accounts), ideally three or less of these accounts would report a balance. 

Additional accounts reporting balances can (and does for many folks) yield a lower FICO score.

Remember YMMV on score impacts of any action you take.  Just keep moving in the right direction and FICO will follow.

[RobertEG]

Of course, overall % util will be the same, no matter how your distribute payemnts, and that is approx 1/2 of your scoring in this category of FICO.  At a current 73% overall util, that is clearly the first concern.

The COMBINED effects of each indiv card % util, along with the % of cards carrying any balance, makes up the other half of revolving util scoring.

 Only FICO knows for sure the relatively weighting of the % util of three indiv cards, plus the inclusion of the % of cards with balances, in determining the other 1/2 of your revolving util score, but if each was equal, then each would impact around 15%. Just a rough gestimate.

In my opinion, to concentrate on the number of cards showing balances might be a mistake. It is not a major factor in util scoring.

Your highest CL card, WaMu, also has the highest % util.  That is your overall % util bread and butter.  You can bet that high util is also of concern to Mr. WaMu.  They might be looking at decreasing your CL on the card if you maintain an extended high % util.  So you may lose existing CL, and thus increase your overall % util.  I suggest looking strongly at first reducing the % util on the highest % util cards first, not stricly for immediate FICO reasons, but also to protect your futire FICO scoring.

[jbee]

Thanks Robert.  I'm going to work to get Wa Mu down.