topic Re: Interesting Credit Card Utilization information I heard. in Understanding FICO® Scoring

Interesting Credit Card Utilization information I heard.

Anonymous — Mon, 04 Apr 2016 19:00:09 GMT

Good morning everyone!
I was watching a show about credit card utilization. The credit expert said that if your utilization is over 50% it starts deducting points. If your utilization is between 30% and 50% it is neutral, and won't change your scores if there aren't any other changes. If your utilization is 30% or less, your score improves, and continues to improve with every deduction. Obviously I knew that you get points for low utilization, but I did not know that 30% to 50% is neutral and won't cause your score to change. I figured the higher it climbs, the lower your score. Is this true or is this guy a quack? Lol

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Mon, 04 Apr 2016 19:01:56 GMT

Now that's extremely good info. Is it the overall utilization or per card?

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Mon, 04 Apr 2016 19:04:08 GMT

Interesting information.

Re: Interesting Credit Card Utilization information I heard.

CH-7-Mission-Accomplished — Mon, 04 Apr 2016 19:05:08 GMT

@Anonymous wrote:
Good morning everyone!
I was watching a show about credit card utilization. The credit expert said that if your utilization is over 50% it starts deducting points. If your utilization is between 30% and 50% it is neutral, and won't change your scores if there aren't any other changes. If your utilization is 30% or less, your score improves, and continues to improve with every deduction. Obviously I knew that you get points for low utilization, but I did not know that 30% to 50% is neutral and won't cause your score to change. I figured the higher it climbs, the lower your score. Is this true or is this guy a quack? Lol

Just curious, who was the expert?

I think he's whack. It's true that the math slope of how bad utilization hurts you gets steeper at higher limits. But there is still some form of one to one relationship. Sometimes going from 1% to 5% doesn't hurt things, but after that you get hurt for every inrease in utilization. It's just that the amount of pain starts to increase as the percent gets higher. You get the highest pain when you are at 90% and above.

There is a very nice chart showing the precise moves on the other major credit board. It was well researched by the master of all of this, Bob Wang.

Re: Interesting Credit Card Utilization information I heard.

Chris679 — Mon, 04 Apr 2016 19:24:05 GMT

If your score is "nuetral" but you could be gaining points with lower utilization then you are still losing out on those points.

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Mon, 04 Apr 2016 20:41:51 GMT

@Anonymous wrote:
Good morning everyone!
I was watching a show about credit card utilization. The credit expert said that if your utilization is over 50% it starts deducting points. If your utilization is between 30% and 50% it is neutral, and won't change your scores if there aren't any other changes. If your utilization is 30% or less, your score improves, and continues to improve with every deduction. Obviously I knew that you get points for low utilization, but I did not know that 30% to 50% is neutral and won't cause your score to change. I figured the higher it climbs, the lower your score. Is this true or is this guy a quack? Lol

The guy is a quack. 50% is not neutral and if you have an overall utilization of 50% your scores will nosedive. Even at 30% yours scores will go down. Ideally you want to be below 10% or lower.

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Mon, 04 Apr 2016 20:53:37 GMT

@Anonymous wrote:
@Anonymous wrote:
Good morning everyone!
I was watching a show about credit card utilization. The credit expert said that if your utilization is over 50% it starts deducting points. If your utilization is between 30% and 50% it is neutral, and won't change your scores if there aren't any other changes. If your utilization is 30% or less, your score improves, and continues to improve with every deduction. Obviously I knew that you get points for low utilization, but I did not know that 30% to 50% is neutral and won't cause your score to change. I figured the higher it climbs, the lower your score. Is this true or is this guy a quack? Lol
The guy is a quack. 50% is not neutral and if you have an overall utilization of 50% your scores will nosedive. Even at 30% yours scores will go down. Ideally you want to be below 10% or lower.

I agree because I have experienced it already. Anytime your utilization goes over 30% (even on 1 card) your score will take a hit. I lost 12-18 points (depending on bureau) just for hitting 31% on 1 card - even though my overall utility was less than 10%.

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Mon, 04 Apr 2016 20:57:17 GMT

I love this forum!!! Can I just say that? All of you are so helpful!!!

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Mon, 04 Apr 2016 21:50:39 GMT

I will try to pull it back up and get his name. Also, if you think about it in a different way you will see more what he is saying--Yes if you go from 10% to 31% you will take a nosedive- Not because of the 31%, but because you were earning points from the 10%. But, if you go from 30% to 45% you won't see a change because it's all in the "neutral". If you go from 49% - 80% you will also take a nosedive because you are now in the losing points area. Do you see what I'm saying now? Whether it's true or not, I don't know. But that's a better way to explain it.

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Mon, 04 Apr 2016 21:54:00 GMT

From my experience, going from 35% down to 5%, my score went up 70+ points. Leaving it at 35% for a month, it was stagnant.

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Mon, 04 Apr 2016 21:54:36 GMT

Below 10% is ideal of course, we all know that. But when you see your score lower when you get to 30% it's not because you are losing points from from being at 30%, you are losing points because you were in the positive Point bracket from the 0% to 29%. Does that make sense?

Re: Interesting Credit Card Utilization information I heard.

kdm31091 — Mon, 04 Apr 2016 21:55:38 GMT

Ultimately, it's not a scoring factor one should really stress over. It has zero memory and no long term impact. People have argued for years over what is the "best" util or what you can "get away with" and not have a score impact, but unless you have a major app planned, doesn't seem to be really worth fretting over.

Re: Interesting Credit Card Utilization information I heard.

SouthJamaica — Mon, 04 Apr 2016 22:50:18 GMT

@kdm31091 wrote:
Ultimately, it's not a scoring factor one should really stress over. It has zero memory and no long term impact. People have argued for years over what is the "best" util or what you can "get away with" and not have a score impact, but unless you have a major app planned, doesn't seem to be really worth fretting over.

I disagree with that, because there are so many instances these days where credit inquiries are made which are not what we think of as 'major apps planned'. E.g., getting an apartment, cosigning on a kid's apartment, getting auto insurance, getting a cell phone account, soft pulls for CLI increases and for marketing. It seems to me that credit inquiries can happen when you least expect them, so that it's not a bad idea to try to keep one's scores up there if it's not too much trouble.

Re: Interesting Credit Card Utilization information I heard.

CH-7-Mission-Accomplished — Mon, 04 Apr 2016 22:59:56 GMT

@SouthJamaica wrote:
@kdm31091 wrote:
Ultimately, it's not a scoring factor one should really stress over. It has zero memory and no long term impact. People have argued for years over what is the "best" util or what you can "get away with" and not have a score impact, but unless you have a major app planned, doesn't seem to be really worth fretting over.
I disagree with that, because there are so many instances these days where credit inquiries are made which are not what we think of as 'major apps planned'. E.g., getting an apartment, cosigning on a kid's apartment, getting auto insurance, getting a cell phone account, soft pulls for CLI increases and for marketing. It seems to me that credit inquiries can happen when you least expect them, so that it's not a bad idea to try to keep one's scores up there if it's not too much trouble.

I agree with this too. The all too common event that happens on this site and the other major credit site is that somebody discovers that ABC Credit Union is handing out 100K Visa card limits to those with a 680 FICO08, or something equally silly. You can't fix your utilization percentages in less than 30 days, assuming you have the money to fix it at all.

I think 1% utilization is best, but I would advise anyone to try to make sure that they never have reported utilization above 10%, unless it is by informed choice by using say a large 0% limit to finance home improvements or something.

When your scores are 820 and you run up your balancs and now have a 760, you can still get the best credit products. When you have a 680 FICO and you run up reported balances to where you are down to a 630, you can miss golden opportunities, and you could have prevented it by being more careful.

It really depends how high your sores are to start with.

Re: Interesting Credit Card Utilization information I heard.

Mattopotamus — Mon, 04 Apr 2016 23:51:37 GMT

^ Could not agree more, and that has been my experience. When I dropped my utilization from 20% to around 5% my scores jumped from 770s to low 800s. Now I pay everything in full and let one card post a balance that keeps me between 1% and 2%

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Tue, 05 Apr 2016 00:18:12 GMT

This is really only a question of where you put the "0" change in score. Someone said that utilization were purely negative, and that anything above 1% cost you points, it would have the same impact as what this guy was saying. At the same time, if utilization were purely positive, and anything below 100% gave you points, it would still have the same impact.

Since no one doesn't have a utilization (i.e. you are always getting SOME impact of utilization in your score), whether it is positive or negative is entirely relative.

Re: Interesting Credit Card Utilization information I heard.

kdm31091 — Tue, 05 Apr 2016 00:26:33 GMT

Most of the time we know we are going to seek credit, even if it's a HP for apartment/cell phone/etc. Typically those aren't spur of the moment things. In any case, I see what you are saying. I just think spending too much effort "optimizing" util isn't really worthwhile for most situations. YMMV.

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Tue, 05 Apr 2016 01:52:13 GMT

@Anonymous wrote:
I will try to pull it back up and get his name. Also, if you think about it in a different way you will see more what he is saying--Yes if you go from 10% to 31% you will take a nosedive- Not because of the 31%, but because you were earning points from the 10%. But, if you go from 30% to 45% you won't see a change because it's all in the "neutral". If you go from 49% - 80% you will also take a nosedive because you are now in the losing points area. Do you see what I'm saying now? Whether it's true or not, I don't know. But that's a better way to explain it.

That makes more sense - thanks!

Re: Interesting Credit Card Utilization information I heard.

Anonymous — Tue, 05 Apr 2016 02:47:02 GMT

For those of us who can't afford to pay down to 1% all of the time, I think it's a really good point. I'm curious to see if it works..if you barely have the money or are stressing out about paying down to 30% it would be cool if 30%-50% was all the same meaning no change in score. If an unexpected financial event comes up, and you can only pay down to 45%, maybe it won't be so stessful for that person. It would be cool to test.

Re: Interesting Credit Card Utilization information I heard.

Revelate — Tue, 05 Apr 2016 03:08:44 GMT

Quack Quack, it's a duck!

You get bucketed, and then scored within that individual scorecard. Less (but non-zero) utilization is better... and every breakpoint beyond optimal is a penalty. It's that simple really and almost certainly absolutely setup that way from an algorithm perspective: why make an additional calculation when it's not necessary? Sloppy algorithm design, and as always Occam's Razor applies.