topic Re: Utilization question in Understanding FICO® Scoring

Utilization question

chefd2 — Wed, 19 Oct 2016 14:05:14 GMT

I understand the lower the utilization the better, but are thre benchmarks that improve it more? For example if I an at 35%, would i get a big ger jump by going under 30% besides just the fact that I lowered my utilization by 5 or 6 %.

Thanks in advance for your help

Re: Utilization question

redbeard — Wed, 19 Oct 2016 14:12:34 GMT

A lot of this depends where your score is at to start with. There is no single silver bullet, it is always a combination of things.

For utilization, there does seem to be 'bumps' at 10%, 30% and then a penalty box above 90%. This is both in total across all of your credit cards and across each card individually.

It is always a good idea to keep utilization under 30%, so yes, this will give you a bit of a boost, but how much is hard to say.

Dan

Re: Utilization question

Anonymous — Wed, 19 Oct 2016 16:45:24 GMT

You will get the biggest benefit from keeping your total utilization (all cards together) < 8.99%.

You can have any particular card much higher (individual utilization). It's unclear exactly where the penalty begins for individual util but there appears to be no penalty as long as you are < 49%. The threshold may be even higher.

You will also get a benefit from having most of your credit cards showing a $0 balance (as long as you have at least one card showing a positive balance). The one card with the balance should:

* Not be a charge card

* Not be an AU card

* Have a balance > $4.

Re: Utilization question

chefd2 — Wed, 19 Oct 2016 16:54:29 GMT

A follow up question.

So if you had 7 cards with a CL on all combined at $100,000.00. 6 of them are 0 balance but one is 20,000 balance owed, CL 25,000. I did a BT to get 0 interest. IS that worse than having balances on say 4, bit smaller uti on the four, rather then 6 o balance and 1 with a high uti? Its the same overall uti.

Thanks in advance for any help

Re: Utilization question

Anonymous — Wed, 19 Oct 2016 18:22:59 GMT

Purely from a FICO scoring perspective, and ignoring any financial benefit you are getting from having 20k at 0%, you'd want to have 2-3 cards showing a balance with each card at < 49%.

This way you'd have > 51% of your cards showing a $0 balance, which gives you some benefit, and you'd eliminate for certain any scoring penalty associated with having a high individual utilization.

Is there any particular reason you need to have a high score in the next six months? If the answer is no, then the smartest and simplest approach is just to work on paying that big balance down. It is currently at 80%. You might well lose any individual penalty as it goes down below 69%.

One thing I would definitely do is make sure that every month you are paying far more than the minimum payment. People who have high individual balances and yet only pay the minimum payment are (as a statistical group) far more risky to lenders than those who always pay far more than the minimum payment or even better people who always PIF. Lenders/creditors can now make those kinds of distinctions when they pull your credit report -- they can even see that you did that in the past. So it is a good habit to create a history of either always paying in full or (failing that) always paying far more than the MP. You just don't want to be in that group that has big balances and only pays the MP.

Re: Utilization question

sarge12 — Wed, 19 Oct 2016 18:56:10 GMT

@chefd2 wrote:
A follow up question.

So if you had 7 cards with a CL on all combined at $100,000.00. 6 of them are 0 balance but one is 20,000 balance owed, CL 25,000. I did a BT to get 0 interest. IS that worse than having balances on say 4, bit smaller uti on the four, rather then 6 o balance and 1 with a high uti? Its the same overall uti.

Thanks in advance for any help

In this situation I would try to get an installment loan to pay off the revolving debt if I could not put a serious dent in it otherwise. Revolving debt is best to PIF. The main purpose for CLI on credit cards is to lower your utilization. As a general rule I never exceed 10% on any individual card.

Re: Utilization question

chefd2 — Wed, 19 Oct 2016 19:01:30 GMT

I think I can pay most of it down within a year at the most. i just paid it down to a balance of 16000 today, which is my BT amount So now I have bal 16000.00 cl 25000.00

Re: Utilization question

Anonymous — Wed, 19 Oct 2016 19:07:54 GMT

@sarge12 wrote:
@chefd2 wrote:
A follow up question.

So if you had 7 cards with a CL on all combined at $100,000.00. 6 of them are 0 balance but one is 20,000 balance owed, CL 25,000. I did a BT to get 0 interest. IS that worse than having balances on say 4, bit smaller uti on the four, rather then 6 o balance and 1 with a high uti? Its the same overall uti.

Thanks in advance for any help
In this situation I would try to get an installment loan to pay off the revolving debt if I could not put a serious dent in it otherwise. Revolving debt is best to PIF. The main purpose for CLI on credit cards is to lower your utilization. As a general rule I never exceed 10% on any individual card.

Hey Sarge. I think his CC debt is currently at 0%. So in his situation it may make more sense to just steadily pay down the 0% card than to take out a 6% personal loan (say) to pay it off.

Re: Utilization question

Anonymous — Wed, 19 Oct 2016 21:12:59 GMT

@chefd2 wrote:
I think I can pay most of it down within a year at the most. i just paid it down to a balance of 16000 today, which is my BT amount So now I have bal 16000.00 cl 25000.00

That puts you at 64% utilization which is well below the "maxed out" penalty range, so you should be in decent shape with respect to utilization. You may see slight scoring bumps when you hit 49%, 29% and 9% on that card, but we're probably talking a couple of points tops (possibly none). The fact that your other 6 cards are at $0 balances means that your aggregate utilization is at 16% currently which is good, but not great. Great would be 9%, which you'll be at when you bring your $16k balance down to $9k; then you'll be at 9% aggregate (the high end of the ideal range) and your individual card utilization will be at 36% which is no big deal on a single account at all when your aggregate utilization is a single-digit percentage.