topic Re: Utilization of Credit in Credit Cards

Utilization of Credit

Anonymous — Mon, 12 Mar 2012 14:56:10 GMT

Quik question for all you experts on this board. I had a credit score of 540 before I applied for my one and only credit card and isntantly got a bump of about 40 points on my Fico. I went a couple of months of utiliying only about 5% of the credit limit and jumped all the way up to the 640 ish range after a few months I started to use the credit card more using about 60% of the credit on the card. Instantly I dropped to 592. Does the fico model score so much on utilazation of credit that I see these wild score swings. I cant see anything else on my report that would suggest anything else negative. Any advice on this would be appreciated.

Re: Utilization of Credit

tcbofade — Mon, 12 Mar 2012 15:01:07 GMT

Yes.

Utilization is about 10% of your score...if you've only got one credit card, allowing it to report with high utilization will drop your score about 10%

Re: Utilization of Credit

Anonymous — Mon, 12 Mar 2012 15:02:02 GMT

Yes, it can, specially when you only have 1 card.

Just keep it between the 1 to 9 range for "optimal" results (YMMW).

Re: Utilization of Credit

Anonymous — Mon, 12 Mar 2012 15:16:55 GMT

Okay so ill pay the balance before the statement cuts. how long until I see the score recover.

Re: Utilization of Credit

Anonymous — Mon, 12 Mar 2012 15:18:06 GMT

Utilization is the most important factor in your fico score, keeping it at 10% at the statement date is the best method for helping your score. good luck try getting another card to lower your overall utilization, like a cap 1 or a store card you frequently shop at which are easy to qualify for (not Macy's as they do not report limits) having 4-6 cards is not bad.

Re: Utilization of Credit

Anonymous — Mon, 12 Mar 2012 15:31:13 GMT

I remember reading utlilzation is about 30% of your score.

An exert from Fico Score Calculation Article

2. Total debt and total available credit

Total debt and total available credit counts for about 30%. This section looks at how much debt you have compared to the total available credit on your accounts. If all of your accounts are maxed out, you will be considered a poor credit risk, because it appears that you are struggling to pay off the debt you have already incurred.

If your account balances are relatively low compared to your available credit, this part of the risk analysis should help your overall credit score. The score calculation also looks at these two factors independently.

Having too much available credit, whether you have used it or not, could hurt your credit score, as statistical studies have shown that people with excessive amounts of available credit are a higher credit risk. Unfortunately, the bureaus do not define exactly what they consider excessive, so best tip is to use credit conservatively and to keep your debt-to-credit limit ratio low.

Re: Utilization of Credit

Anonymous — Mon, 12 Mar 2012 15:32:44 GMT

+1 still important

Re: Utilization of Credit

tcbofade — Mon, 12 Mar 2012 16:10:53 GMT

@Anonymous wrote:
Okay so ill pay the balance before the statement cuts. how long until I see the score recover.

As soon as the credit card company reports your new statement balance...generally 2 or 3 days after your next statement.

Re: Utilization of Credit

Anonymous — Mon, 12 Mar 2012 16:17:38 GMT

Thanks to everybody

Re: Utilization of Credit

Anonymous — Mon, 12 Mar 2012 16:21:59 GMT

@Anonymous wrote:
Quik question for all you experts on this board. I had a credit score of 540 before I applied for my one and only credit card and isntantly got a bump of about 40 points on my Fico. I went a couple of months of utiliying only about 5% of the credit limit and jumped all the way up to the 640 ish range after a few months I started to use the credit card more using about 60% of the credit on the card. Instantly I dropped to 592. Does the fico model score so much on utilazation of credit that I see these wild score swings. I cant see anything else on my report that would suggest anything else negative. Any advice on this would be appreciated.

It is 30% of your score, so it can swing widly. However, it is a point in time scoring, there is no history of it, or your score.

So you can use this to maximize your score at credit application time and not worry about it so much at other times.

Re: Utilization of Credit

LS2982 — Mon, 12 Mar 2012 16:49:54 GMT

@Anonymous wrote:
Quik question for all you experts on this board. I had a credit score of 540 before I applied for my one and only credit card and isntantly got a bump of about 40 points on my Fico. I went a couple of months of utiliying only about 5% of the credit limit and jumped all the way up to the 640 ish range after a few months I started to use the credit card more using about 60% of the credit on the card. Instantly I dropped to 592. Does the fico model score so much on utilazation of credit that I see these wild score swings. I cant see anything else on my report that would suggest anything else negative. Any advice on this would be appreciated.

Yes.

you need to keep your utilization down to about 1-9% for the best possible FICO scoring.

Re: Utilization of Credit

Anonymous — Mon, 12 Mar 2012 18:08:33 GMT

Going for a major car loan in June need my scores in the 650 range so I don't totally get Mod Cut on the APR