topic Understanding CC utlization in Understanding FICO® Scoring

Understanding CC utlization

dynamicvb — Mon, 17 Sep 2018 13:49:42 GMT

I recently applied for an was approved for an Amex Cash Magnet card. The main reason I applied for this was the 0 % APR for 15 months as well as BT. I needed to purchase a lawnmower and really did not have the cash, so I put it on my discover card with a 12K limit.

This brings that utilization to about 26% on that card. I did not get approved for as much as I hoped on the Amex and it was approved with a 4K limit. I can BT 3K on it, but that is going to bring that card to 75% , which if I'm understanding correctly will hurt my scores. This will leave a small amount on the Discover which I could pay down to 0 before the next report date.

I'm not really planning on applying for anything else in the near term, so not sure if I should take the hit and do the transfer or only move a portion of it over like 2K.

Considering I've raised my total available credit by 4K with the new card once it reports. This will have the overall utilization at 19 percent, but I'm not sure whether I would be better not having the Amex at 75% for a few months or if I should only transfer a portion of the total and try to keep it under 50%.

I'm leaning towards the taking the hit on the individual utilization for the interest savings. As I understand, once I get it paid down( in a few months), then I'll get back any points I've lost anyway.

Hopefully, this is clear. Can someone please explain the differences between overall and individual utilization when it comes to what each does to the scores?

Re: Understanding CC utlization

Anonymous — Mon, 17 Sep 2018 15:08:19 GMT

The penalties for individual utilization begin at 29%: 29%, 49%, 69%, 89%.

The penalties for total utilization begin at 9%: 9%, 29%, 49%, 69%, 89%.

Both types of penalties count against you.

If you don't like crossing the 69% breakpoint of individual util (a reasonable concern) you can raise that card to 68%. The one thing I would do for sure is to not fall into the trap of making only minimum payments on any card. Making the bare MP is something that high-risk people are more likely to do, and therefore can be a flag for a CC issuer to consider taking adverse action against you. Always make at least the MP + $2 on every card you have every month. Also make steady attempts toward paying off all of your CC debt on the non-0% cards.

Re: Understanding CC utlization

SouthJamaica — Mon, 17 Sep 2018 15:47:43 GMT

@dynamicvb wrote:
I recently applied for an was approved for an Amex Cash Magnet card. The main reason I applied for this was the 0 % APR for 15 months as well as BT. I needed to purchase a lawnmower and really did not have the cash, so I put it on my discover card with a 12K limit.

This brings that utilization to about 26% on that card. I did not get approved for as much as I hoped on the Amex and it was approved with a 4K limit. I can BT 3K on it, but that is going to bring that card to 75% , which if I'm understanding correctly will hurt my scores. This will leave a small amount on the Discover which I could pay down to 0 before the next report date.

I'm not really planning on applying for anything else in the near term, so not sure if I should take the hit and do the transfer or only move a portion of it over like 2K.

Considering I've raised my total available credit by 4K with the new card once it reports. This will have the overall utilization at 19 percent, but I'm not sure whether I would be better not having the Amex at 75% for a few months or if I should only transfer a portion of the total and try to keep it under 50%.

I'm leaning towards the taking the hit on the individual utilization for the interest savings. As I understand, once I get it paid down( in a few months), then I'll get back any points I've lost anyway.

Hopefully, this is clear. Can someone please explain the differences between overall and individual utilization when it comes to what each does to the scores?

If you don't care about taking the hit on your scores, sure, go to 75% on the Amex card. But I wouldn't, because I feel you never know in life when your credit score might come into play. Me personally I would limit the balance transfer to 28% of the limit.

Re: Understanding CC utlization

K-in-Boston — Mon, 17 Sep 2018 16:34:26 GMT

I'm of the opinion that saving money on interest always takes priority over a few credit score points. (And that means if you're about to get a mortgage or large auto loan, you'll want to save money there by having the rest of your accounts at good utilization ratios even if it does mean paying a bit more interest on those now - paying an extra few percentage points on a car or house can easily swamp paying a little credit card interest.)

While admittedly my profile can stand quite a bit more "abuse" than most when it comes to utilization, I often do balance transfers (and I do them a lot!) in the 60-80% utilization range since I know I'll be making fairly substantial payments getting them down to reasonable levels within a few months. You just want to make sure that it's not a pattern where you have numerous cards maxed out.

Re: Understanding CC utlization

dynamicvb — Mon, 17 Sep 2018 17:00:38 GMT

Thanks for the replies. I'm leaning towards just taking the hit with having one at 75%. Since its brand new, then it likely won't report for a couple of months anyway from what I've found on AMEX reporting practices. I'm not planning on letting this balance stand for more than 4-5 months, so I could probably pay it down to below 69% before it ever reports anyway.

I did call Amex and see about a higher limit and they told me I would have to request a CLI once I get an activate the card. I've read some stories that it is not good with Amex and it messes up your 3X CLI at 61 days if you get a denial, which would likely happen. If they were going to give me more, then I would have expected them to do it at the approval and likely will not extend more until I build up a little history with them.

Re: Understanding CC utlization

K-in-Boston — Mon, 17 Sep 2018 17:18:24 GMT

Some people certainly have reported success with a CLI at activation, but it's not common. Usually if Amex denies you because you asked "too soon," no clock is reset. If they give you any reason other than that, it's an actual denial and that means you can't ask for a CLI on any Amex card for at least another 91 days. Where your Experian score currently sits, I'd probably wait until at least the 61 day mark.

Re: Understanding CC utlization

dynamicvb — Mon, 17 Sep 2018 17:36:18 GMT

@K-in-Boston wrote:
Some people certainly have reported success with a CLI at activation, but it's not common. Usually if Amex denies you because you asked "too soon," no clock is reset. If they give you any reason other than that, it's an actual denial and that means you can't ask for a CLI on any Amex card for at least another 91 days. Where your Experian score currently sits, I'd probably wait until at least the 61 day mark.

Thanks, so I guess you have verified when they look at CLI's they do look at EX? I know that is where the HP hit for the original approval and thought it would also be for CLI's. What is in my sig is 3 points lower than where it sits right now, but doubt that would make a difference anyway.

Re: Understanding CC utlization

Anonymous — Tue, 18 Sep 2018 00:20:26 GMT

If your first and sole transaction on a new card is to to take the card from $0 to 75% of the CL that could set off a fraud alert. Not sure if that would happen, but it might.

Re: Understanding CC utlization

Anonymous — Tue, 18 Sep 2018 02:33:15 GMT

@K-in-Boston
I'm of the opinion that saving money on interest always takes priority over a few credit score points.

I agree with this.

Another option here would be for the OP to just sit tight on the new $4k limit Amex card just giving it a few swipes here and there and wait until Day 61 and request a 3X CLI. He could bring that limit up to $12k and if not would more than likely be able to double it to $8k. After that you can go ahead with the BT and instead of a 75% utilization card you'll be at (say) 25%-38% utilization.

Re: Understanding CC utlization

dynamicvb — Tue, 18 Sep 2018 12:53:30 GMT

@Anonymous wrote:
@K-in-Boston
I'm of the opinion that saving money on interest always takes priority over a few credit score points.
I agree with this.

Another option here would be for the OP to just sit tight on the new $4k limit Amex card just giving it a few swipes here and there and wait until Day 61 and request a 3X CLI. He could bring that limit up to $12k and if not would more than likely be able to double it to $8k. After that you can go ahead with the BT and instead of a 75% utilization card you'll be at (say) 25%-38% utilization.

This would be a good plan, but I think the balance transfer has to be done before 60 days. I'm not sure if that is activation or when I applied. I do need to check on this one and see if that may be an option as it would solve the entire issue.

Thinking about this more. I could just transfer the 75%. Pay off the remaining balance on the Discover at the same time. Then make a payment on the Amex before the statement cuts to bring it under 69%. That way I should be able to keep my overall utilization down to less than 18%, so perhaps I won't take much of a hit. Then before the second statement cuts, I should be able to bring it down to around 14% for the overall and 57% on the individual card maybe a little lower depending on my expenses.

I'm planning on staying in the garden for the next year, so it's not that big of a deal if my score drops a while for utilization. I will have my BK 13 falling off as well as my last two negative accounts during this time too, so any hit I take from utilization would be wiped out with these falling.