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Registered: ‎10-04-2007
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strategic question on improving the FICO score

Hello everyone Smiley Happy, suppose you have 4 credit cards with a credit limit of $10K each ($40K total) and you owe near the limit on all four credit cards.  Now suppose you are getting a bonus of $20K...
 
I have the following question:  is your FICO score better improved by completely paying off 2 of the credit cards (i.e. 2 credit cards are now at 100% paid and 2 credit cards are still at near 100% max) OR paying off 50% on all four credit cards (i.e. $5K for each so you now owe 50% still on all 4 credit cards).  What would give me a bigger "bang for the buck" from a FICO score perspective...
 
anyone's feedback is greatly appreciated...
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Posts: 16,381
Registered: ‎03-12-2007
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Re: strategic question on improving the FICO score



pondering1 wrote:
Hello everyone Smiley Happy, suppose you have 4 credit cards with a credit limit of $10K each ($40K total) and you owe near the limit on all four credit cards.  Now suppose you are getting a bonus of $20K...
 
I have the following question:  is your FICO score better improved by completely paying off 2 of the credit cards (i.e. 2 credit cards are now at 100% paid and 2 credit cards are still at near 100% max) OR paying off 50% on all four credit cards (i.e. $5K for each so you now owe 50% still on all 4 credit cards).  What would give me a bigger "bang for the buck" from a FICO score perspective...
 
anyone's feedback is greatly appreciated...


FICO scoring has two types of util percentage calculations, one that looks at the extent of utilization on individual revolving accounts (i.e. CCs, overdraft protection and sometimes Heloc’s) and the other is cumulative and looks at the extent of utilization on all of your revolving accounts
 
In your situation the trick is to have the fewest CCs reporting balances higher than 50% of the credit limit. So yes you should pay all the CCs so they report <50% util. Having even one CC reporting near maxed-out will really tank your scores big time.
 
Credit Profile - FICO 08 Scores (03-26-2015): EQ 814, EX 817, TU 822
All three scores were 850. Lost points for not having an open installment TL. So, BE WARNED!!!!!
Credit History: 27 years ~ AAoA: 13 years ~ Util: 1% ~ Inqs: TU 1


Credit Cards: Amex BCP ~ Amex Clear ~ Amex Platinum ~ Barclay Ring World Mastercard ~ Chase Freedom Signature Visa ~ CITI Dividend World Mastercard ~ FIA Fidelity Investment Platinum Visa ~ First Hawaiian Bank Gold Visa
Established Member
Posts: 14
Registered: ‎10-01-2007
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Re: strategic question on improving the FICO score

On the subject of strategy, my DH and I have had a rough couple of years with a mismanaged investment that cost us a ton, we were maxed out on all cards, apr shot up as high as 32.49%. We just were able to sell our investment (real estate) and paid off thousands, so now most cards are at util 0-9%. We have a HELOC now at 50% util (CL 25K) and DH has a Car loan with bal $27K, plus a joint installment loan at 3.5K. Scores are me: EQ 572, DH is EQ 559. Based on what I've seen here, we paid down the revolving credit so now total util looks to be 24%. Our loan rates are still high, so I'm waiting on the score to improve so we can refi or negotiate for lower rates. My plan is to avoid the inq/ new accounts and try to negotiate the existing loans and get CLIs when our score improves. Ok, so down to the question: DH has a shorter history than I do. Is it worth it to add him to my older accounts if there are any baddies? It would give him 2 years more history, and it was only one baddie a 30 that was over a year ago. He's already a UA but I know that won't affect score anymore. Also, what kind of a jump do you think we'll see from what we've done already? Thanks, chickadee
Established Contributor
Posts: 504
Registered: ‎05-01-2007
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Re: strategic question on improving the FICO score

Leaving a 3-5% balance of your line of credit will increase your fico score instead of paying off the baalcnes in full. You will have to do this with each revovling account. On a $ 100 line of credit leave a baalnce of $ 3-5 or on a $ 1,000 line of credit leave a $ 30-50 balance. I ran into this situation and Barry from Fair Isaac called me back and explained everything. If you pay off the full baalnce the reason for lower score will be "NO CURRENT REVOLVING BALANCE BEING REPORTED". hIGH BAALNCES ON REVOLVING ACCOUNTS WILL COST YOU 20-40 FICO POINTS.
 
35% of your fico score si your payment hsitory. So on an vehicle loan you will achieve more fico score points by paying on it 4-6 years compared if you pay on it 6 months-2 years which is not very long. Do not trade in your car, pay off the loan,a nd get a new vehicle loan all because the new model came out.
 
On your four open revolving accounts keep them open. DO NOT CLOSE THEM.
 
To keep each credit card active just charge even a candy bar for $ .50      Do this once every six months just so that you occasionally use the card.
 
Instead of applying for new credit have your limits increased. Unless you won or are running a business that requires credit cards, then the most revolving accounst as an individual consumer should be no more than 3.
 
If you are lsited as an authorized user on any account immediately have the credit bureaus delete it from your credit profile. Starting Septmeber 2007 fair Isaac will no longer allow these types of accounts as being a factor in the fico scoring system.
Established Member
Posts: 14
Registered: ‎10-01-2007
0

Re: strategic question on improving the FICO score

Thanks for the info. Unfortunately, nothing we can do on the total util being at 25%, except to apply for CLIs and lower rates when our credit scores get better. I'm so fed up with the CCCs, I'm going to work them for all they're worth, use them, but always PIF so they don't get another penny from us!

My question remains, though... If we actually add my DH to one of my accounts (not UA, but actually make him a joint owner), it would add two years to his credit history(he's only got 4YRs now), but there's one late from over a year ago. Will that hurt or hinder his score?

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