topic Re: Which would improve my Credit Score more? in Understanding FICO® Scoring

Which would improve my Credit Score more?

Anonymous — Fri, 17 Mar 2017 18:44:08 GMT

I have a choice between completely paying off one card account

Getting my Credit Utilization under 30% with another Credit card account.

My Time window is 2 weeks since I am applying for a mortgage and I need help from the community to see which action would give me a higher score.

Thanks

Re: Which would improve my Credit Score more?

Anonymous — Fri, 17 Mar 2017 19:10:38 GMT

We can help you best if you tell us how many cards you have (it may be exactly two, but not I'm sure) and the balances and credit limits on each. The following template would give us what we need:

Card #1. Current balance = ____. Credit Limit = _____

Card #2. Current balance = ____. Credit Limit = _____

Card #3. Current balance = ____. Credit Limit = _____

etc.

Re: Which would improve my Credit Score more?

SouthJamaica — Fri, 17 Mar 2017 20:29:10 GMT

@Anonymous wrote:
I have a choice between completely paying off one card account

Or

Getting my Credit Utilization under 30% with another Credit card account.

My Time window is 2 weeks since I am applying for a mortgage and I need help from the community to see which action would give me a higher score.
Thanks

1. You may not be able to accomplish anything in a 2 week time window.

2. So I would just make the payment towards the account with the closest statement date.

Re: Which would improve my Credit Score more?

Anonymous — Tue, 21 Mar 2017 02:19:15 GMT

Card #1. Current balance = 4,918.56. Credit Limit = 10,000

Card #2. Current balance = 912.70. Credit Limit = 6,800

Thank you for the help

@Anonymous wrote:
We can help you best if you tell us how many cards you have (it may be exactly two, but not I'm sure) and the balances and credit limits on each. The following template would give us what we need:

Card #1. Current balance = ____. Credit Limit = _____
Card #2. Current balance = ____. Credit Limit = _____
Card #3. Current balance = ____. Credit Limit = _____
etc.

Re: Which would improve my Credit Score more?

SouthJamaica — Tue, 21 Mar 2017 02:29:45 GMT

@Anonymous wrote:
Card #1. Current balance = 4,918.56. Credit Limit = 10,000
Card #2. Current balance = 912.70. Credit Limit = 6,800

......

Since you have an 11 day "time window" your best bet is to pay the money towards the card that has a statement date within the next 11 days. If neither does, then you're not going to affect your score within the time window. Even if there is a statement cut within the next 11 days, it doesn't mean the new balance will report within 11 days.

But putting aside your 11 day time window, I would expect you to get the most bang for your buck by paying off card #2 completely and paying the additional $1k+ towards card no. 1

Re: Which would improve my Credit Score more?

Aahz — Tue, 21 Mar 2017 06:52:06 GMT

@SouthJamaica wrote:
@Anonymous wrote:
Card #1. Current balance = 4,918.56. Credit Limit = 10,000
Card #2. Current balance = 912.70. Credit Limit = 6,800

......
Since you have an 11 day "time window" your best bet is to pay the money towards the card that has a statement date within the next 11 days. If neither does, then you're not going to affect your score within the time window. Even if there is a statement cut within the next 11 days, it doesn't mean the new balance will report within 11 days.

But putting aside your 11 day time window, I would expect you to get the most bang for your buck by paying off card #2 completely and paying the additional $1k+ towards card no. 1

I'm not sure why you think this.

Paying Card#1 down to $2890 would bring not only that card below 30%, but also aggregate revolving utility to 22% and would give a much better FICO hike then paying off one card and leaving the other above 30% individual utility.

Though I totally agree any changes are likely to be reported within the next 11 days. Can't hurt to call the creditor and ask for a manual update once the payment is made, though.

Re: Which would improve my Credit Score more?

SouthJamaica — Tue, 21 Mar 2017 10:30:06 GMT

@Aahz wrote:
@SouthJamaica wrote:
@Anonymous wrote:
Card #1. Current balance = 4,918.56. Credit Limit = 10,000
Card #2. Current balance = 912.70. Credit Limit = 6,800

......
Since you have an 11 day "time window" your best bet is to pay the money towards the card that has a statement date within the next 11 days. If neither does, then you're not going to affect your score within the time window. Even if there is a statement cut within the next 11 days, it doesn't mean the new balance will report within 11 days.

But putting aside your 11 day time window, I would expect you to get the most bang for your buck by paying off card #2 completely and paying the additional $1k+ towards card no. 1
I'm not sure why you think this.

Paying Card#1 down to $2890 would bring not only that card below 30%, but also aggregate revolving utility to 22% and would give a much better FICO hike then paying off one card and leaving the other above 30% individual utility.

Though I totally agree any changes are likely to be reported within the next 11 days. Can't hurt to call the creditor and ask for a manual update once the payment is made, though.
Because number of cards reporting a balance is a major component.

BTW aggregate utilization is the same no matter how the money is paid.

Re: Which would improve my Credit Score more?

Anonymous — Tue, 21 Mar 2017 11:41:50 GMT

@Aahz wrote:
Paying Card#1 down to $2890 would bring not only that card below 30%, but also aggregate revolving utility to 22% and would give a much better FICO hike then paying off one card and leaving the other above 30% individual utility.

I disagree.

There are 3 factors at play. Most important is aggregate utilization followed by number of cards reporting balances and individual balances. Aggregate in either case remains the same. Paying off one card completely drops the OP from 100% of cards reporting balances to 50% of cards reporting balances which is a favorable move. Yes one of his individual balances will still be pretty high, but he now also has one at zero to counter that. Paying off the one card should yield equal or more points.

Re: Which would improve my Credit Score more?

Aahz — Wed, 22 Mar 2017 01:27:35 GMT

@Anonymous wrote:
@Aahz wrote:
Paying Card#1 down to $2890 would bring not only that card below 30%, but also aggregate revolving utility to 22% and would give a much better FICO hike then paying off one card and leaving the other above 30% individual utility.

I disagree.

There are 3 factors at play. Most important is aggregate utilization followed by number of cards reporting balances and individual balances. Aggregate in either case remains the same. Paying off one card completely drops the OP from 100% of cards reporting balances to 50% of cards reporting balances which is a favorable move. Yes one of his individual balances will still be pretty high, but he now also has one at zero to counter that. Paying off the one card should yield equal or more points.

In my experience number of cards reporting balances is worth far fewer points than individual utilization.

When I had 8 of 16 cards reporting balances (individual utility below 30% on all cards) and reduced that to 3 of 16 cards maiking all three between 30% & 50% individual utilization (same aggregate utilization) I lost 24-30 points.

When I spread the debt back out (dropping individual utilization again) the points all came back.

Re: Which would improve my Credit Score more?

Anonymous — Wed, 22 Mar 2017 02:21:33 GMT

Well, I suppose this varies greatly from profile to profile then.

Re: Which would improve my Credit Score more?

Anonymous — Wed, 22 Mar 2017 02:53:08 GMT

Hello Aahz! It sounds like you are talking about the reaction of FICO 8 to the number of cards showing a balance. But our OP isn't interested in the FICO 8 model. He's asking about the reaction of the mortgage models. Thomas Thumb has done some pretty extensive testing and researched it other ways, and he's concluded that the mortgage models are far more sensitive to this particular factor.

In our OP's case, 100% of his cards now show a balance. With SouthJ's proposed approach, he'd be reducing that to 50% of his cards. SJ's approach would also reduce the individual utilization of the remaining card from 50% to 39%. So there would be a gain from the individual scoring factor too.

A fair guess is that the points our OP will get from reducing his cards showing a balance from 100% to 50% is more than the points he'd get from reducing the big card from 39% to 29%.

Of course, nobody knows for sure, it's just in our opinion the most reasonable gamble given the acute timeline as described.