Valued Contributor
Posts: 1,567
Registered: ‎09-15-2012
Re: Utilization Theories

bernhardtra wrote:

Remember, utilization affects different people differently.  If you have no negatives on your report then the recommended utilization is under 40%.  If you have negative items on your report then the recommended is under 20%.  And this is definitely true!  I have a student loan payment issue on my report and my utilization has to be under 20% for a higher score!  Even one card with a high utilization can affect this.  It doesn't matter if the overall utilization is less than 20%, the score will drop if that card has a high utilization on it.  At this point I can't tell you what it is, since I loaned one card to my sister to use and she had it up to 73%.  My score dropped even though my utilization was not high.  Overall it has topped out at 23%.  With this months payment I will know the result in a few days.  The utilization will drop to 47%.  (Partially due to the payment and partially due to the fact they gave me yet another CLI.)  I won't be able to monitor effectively the percentage threshold for the score drop if the score raises again.  I will be able to do so if the threshold has not yet been reached at a later date, say when the utilization is lower than 40%, 30%, etc.  I will know if there is no other score increases later that the threshold will be between 50% and 70%. 


Utilization, unlike other factors, has no history involved with it.  So your score should rise again when overall and individual utilization is below the threshold points.  Some have pointed out there is no way to know by creditors if the amount reported is PIF or revolved.  This is only partially true and is dependent a bit on how often a creditor checks your report.  For example, I noticed a long time ago that Capone was soft pulling my report about every week!  They could easily put this info into a database and compare the account amounts for some reflection on what you are actually doing.  If you card reports paid in full one month, before you go back to charging on it, then they could partially deduce that you are likely PIF'ing.  This info could be useful to a bank in deciding what card or upgrade product to offer you.  If you are paying in full, then they could target you for a new product with a lower interest rate or one with rewards to sway you to chose a different product and use their product more.  Even if they aren't making interest off you, they make money off the transactions.  I use the card with the best rewards and other terms the most and always PIF each month!  I even make sure that if any of my other creditors are monitoring it so closely, they can see that!  I do want a card with low interest and great rewards one day, so I even make sure I monitor my utilization so that I can benefit from solicitation!  And by benefit, I mean take the card as quick as it is offered to me!  That is when I can start closing cards or let them close on their own naturally!

Believe me, if you want an 800 score, all else being equal, you want utilization under 10%. I'm not saying you can't get there with higher utilization than that, but I am saying that putting your utilization under 10% will always get you a score increase. 20% or 40% is a good start, but you HAVE to get lower to get the best impact. 


I understand that the question involves other utilization theories, but all of that is going to speculation and subject to individual experiences. The 1% - 9% theory is not subject to individual experiences (except in extreme situations of 400 and 500 credit scores, where utilization is the least of your worries). So that's where my advice ends. 

In My Wallet: Amex BCP (12/12) $22.200, Cap1 Quicksilver (6/12) $14,000, Chase CSP (4/14) $12,000, Barclaycard Rewards (5/13) $10,500, Citi Forward (12/12) $9,600, Chase Freedom (12/12) $5,000

Last App: April 2, 2014