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jello77 wrote:

When I read articles about credit scores, the author will sometimes say that "utilization" counts for 30% of your FICO score. This statement is based on the well-known pie chart that shows how much different factors effect your score.

 

But the category that accounts for 30% is NOT utilization, it's "Amounts owed." Utilization is just one of six factors included in the "Amounts owed" category, as explained on this FICO-sponsored page:

 

http://www.scoreinfo.org/FICO-Scores/Score-Ingredients.aspx

 

 

The "Amounts owed" category includes:

 

(1) How much of total credit line is being used on revolving accounts. (This is referred to as utilization).

(2) Amount owed on all accounts.

(3) Amount owed on different types of accounts.

(4) Whether you are showing a balance on certain types of accounts.

(5) How much is still owed on installment loan accounts, compared with the original loan amounts.

(6) Number of accounts with a balance (the more revolving accounts with a balance, the lower your score will be)

 

 

The last factor (number of accounts with a balance) is often overlooked by authors who write about credit scores. For example, I recently read an article recommending that if you have a high balance on one card, you can improve your score by spreading out the amount owed over several cards.

 

This advice is questionable on two grounds. First, although it would reduce utilization of the card with the initial high balance, it would not reduce your overall utilization. Second, any positive effect on your score from reducing utilization on the high balance card might be offset by the negative effect of having more cards with balances.

 

I have not seen much information (on this board or elsewhere) about how many points your score can change based on how many cards have a balance. So I did an experiment with my own cards. Over the past 6 months, I paid my cards before the statement date to keep the reported balance on each card at either 0 or $100 (less than 1% utilization on each card). No other changes to my credit report took place during this period (no new cards, no inquiries, etc.).

 

Here is how my Equifax FICO score was effected by changing the number of cards with a balance:

Cards with $100 balance_____EQ FICO score_____Effect on score

 

_______0_____________________807

 

_______1_____________________811_____________(+4)

 

_______2_____________________806_____________(-5)

 

_______3_____________________801_____________(-5)

 

_______4_____________________787_____________(-14)

 

_______5_____________________770_____________(-17)

 

Some frequent posters on this board have said that to optimize your FICO score, have only one card report a small balance.

 

My experiment supports this advice.

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Fantastic post jello. So we know that at least up to 5 cards it is ideal to have 1 showing a balance, and it's a really nice relationship where each added card causes another decrease in the credit score. I imagine that 1 is a ratio in this case and not an absolute number.

Has anyone done experiments like this by changing the utilization? I am wondering if 1% is ideal.

What would I need to sign up for in order to do an experiment like this? Eg I just looked at Equifax Score Watch and it's $14.95/month but I only get 2 score reports/year? It looks like jello was getting his credit score monthly x 6 months.