topic Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!! in Understanding FICO® Scoring

Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Carlosjb3 — Sat, 15 Sep 2018 04:26:20 GMT

Good evening,

I have a tough journey ahead of me in repairing my credit and I need guidance and understanding on how to achieve 700+ scores in the forseeable future. Please bear with me.

From my understading credit utilization represents 30% of your fico score that ranges from 300-850 which when doing the math that is 255 points max for the credit utilization category correct? Does this mean that if my utilization is at 100% I lose 255 points? If I bring it back down to between 1-3% utilization overall do I gain over 200 points for this category??

For example, my credit utilization is absurdly high at 100% with my scores being EQX 602/TU 560/EXP 601.

Does this mean that I've lost the maxed amount of points of 255 on credit utilization since I'm maxed on all my credit cards?

I have two credit cards that are maxed out.

What if I pay of both of my credit cards leaving a small balance in 1 of the cards reducing my overall utilization to between 1-3% will I gain 200 plus points/max out on my score for this category?

I hope I didn't confuse anybody with my questions but I'm trying to understand how this works on my way to repairing my credit. I tried searching the board for an answer but I didn't quite find what I was looking for. I should be able to payoff both of my credit cards in full in 2 months. Thanks in advance for any input.

About my credit report:

Scores are EQX 602/ TU 560/ EXP 601
2 secured credit cards (Discover & Capital One maxed out but will pay off in 2 months). Current with no lates on credit report. I've had both cards for 8 months and 12 months respectively with combined limit of $2500
1 car loan that is 1 year old that is current with no lates on credit report.
9 hard inquiries but they were all in 2017
1 collection account that is 2 years old through TU & EXP (at&t uverse)
2 Payday loan accounts that was charged off 3 years ago but reporting $0 balance.
3 credit card accounts that were charged off 3 years ago but I paid them off they are reporting $0 balance
0 public records/judgements
2.8 years average age of accounts

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Anonymous — Sat, 15 Sep 2018 06:08:45 GMT

The category you are thinking of is not "CC Utilization" but "Amounts Owed." Total Revolving Utilization is one factor of several from the AA category, which includes the amounts you owe on loans, the utilization of each card considered separately, the number of accounts with a positive balance, etc.

Here is a link that will help you learn more about the breakdown:

https://www.myfico.com/credit-education/whats-in-your-credit-score

Even if we consider all the factor in the AA category together, they don't add up to 255 points, for the reason that the lowest the score can go is 300. The spread of points is 550 (300 to 850) and so if you wanted to do what you had been thinking of it would have involved multiplying 30% by 550.

Even still there are reasons that the spread isn't a full 550. For one reason it is actually not possible to score a 300, even though FICO seems to imply it is. Then there is also the fact that each consumer is assigned to one of 12 scorecards, all of which have different ranges in the FICO 8 model.

All of this is by way of saying that total CC utilization is not weighted 0-255 points -- significantly less than that.

Nonetheless it has a substantial effect on your score and you should certainly avoid maxxing out your cards. It hurts your score a lot and also increases the chance that your issuers might close your cards.

Your rebuilding steps are simple:

* Never make a late payment again -- not ever.

* Pay off all your CC debt.

* Make sure that one card always reports a small positive balance.

After you have demonstrated good behavior for a year, you can begin exploring whether you might be able to get your derogs deleted (improbable but possible with enough persistance on your part).

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Thomas_Thumb — Sun, 16 Sep 2018 13:07:09 GMT

My guestimate is dirty scorecards may span a range up to 350 points whereas clean scorecards have a narrower band of perhaps 250 points at most.

If score were to drop more than 200 points while staying clean it likely includes a scorecard reassignment.

For example, I believe there is a scorecard change tied to a drop in AoYA when new accounts are opened - if AoYA had been over 24 months previously and new accounts are opened then profile is assigned to a "new credit" scorecard.

There is a scoring metric associated with "time since most recent account is too short" that ties to a 12 month timeframe. However, that timeframe is a threshold for scoring, not scorecard assignment.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Anonymous — Sun, 16 Sep 2018 05:15:10 GMT

@Carlosjb3
From my understading credit utilization represents 30% of your fico score that ranges from 300-850 which when doing the math that is 255 points max for the credit utilization category correct? Does this mean that if my utilization is at 100% I lose 255 points? If I bring it back down to between 1-3% utilization overall do I gain over 200 points for this category??

For example, my credit utilization is absurdly high at 100% with my scores being EQX 602/TU 560/EXP 601.

Does this mean that I've lost the maxed amount of points of 255 on credit utilization since I'm maxed on all my credit cards?
I have two credit cards that are maxed out.

You sort of answered your own question here that it's impossible for utilization to account for 255 points. If you're maxed out currently and went to ideal, you'd then gain 255 points meaning that 2 out of 3 of your scores would be 850.

Typically as a general guideline, I always suggest that going from ideal revolving utilization to maxed out revolving utilization (or vice versa) constitutes around a 100 point variance in your FICO scores. That being said, if you're around maxed out now, expect something in the ballpark of 100 points added to your scores if you were to take your utilization down to an idea place, say, 1%-5%.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Thomas_Thumb — Sun, 16 Sep 2018 13:29:01 GMT

A drop of 100 points for maxing out AG UT% with all cards high reporting balances is a good ballpark. Of course if AG UT is maxed out typically means most individual card UTs must be maxed out as well. Data suggests impact associated with these utilization factors is greater on clean scorecards than on dirty scorecards. Pasted below are a couple poster data points for reportedly clean files.

TU: 705 => 609, EQ: 719 => 634, EX: 720 => 635

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/lost-100-points-in-less-than-a-week/m-p/4373484#M102622

732 => 590

https://ficoforums.myfico.com/t5/Credit-Cards/I-maxed-out-all-my-credit-cards/m-p/3490565#M964636

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Carlosjb3 — Tue, 18 Sep 2018 15:23:43 GMT

Thanks for all the feedback guys. When I try out the score simulator it states that I will gain between 45-60 points if I pay off 97% of my revolving debt. I know that simulators are not accurate, however, I can't help but to wonder if the score simulater is over estimating or under estimating my potential score increase?

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Anonymous — Tue, 18 Sep 2018 15:36:44 GMT

@Carlosjb3Thanks for all the feedback guys. When I try out the score simulator it states that I will gain between 45-60 points if I pay off 97% of my revolving debt. I know that simulators are not accurate, however, I can't help but to wonder if the score simulater is over estimating or under estimating my potential score increase?

Simulators are garbage and can't be trusted. If your aggregate utilization is 90%-100% (which I believe was verified in your original post) and you pay off 97% of it, you'll be well within the optimal utilization range. If that's the case, you'd gain more than 45-60 points. As I suggested earlier, typical gain for such a move is usually around 100 points.

It's important here to clarify the language of course, as paying of 97% of your debt doesn't have to mean paying down 97% utilization.

I could be at 2% utilization and pay off 97% of my debt, bringing me down to 1% utilization, for example.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Thomas_Thumb — Tue, 18 Sep 2018 17:12:50 GMT

If the OP is on a dirty scorecard, impact of utilization is given a lower signal strength than on clean scorecards. Dirty scorecards assign a large portion of scorecard points toward status of derogatory attributes. There may be a smaller upside on optimizing utilization for profiles with derogatories.

It would be nice to get before/after score data points from the OP on the drop in utilization.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Shooting-For-800 — Wed, 19 Sep 2018 01:06:48 GMT

Utilization affects everyone differently.

I would say most would not go up or down more than 50 points even if they went from 5% utili to 95%.

I just charged $20k and my score dropped like 10 points.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Anonymous — Wed, 19 Sep 2018 01:27:28 GMT

@Shooting-For-800

I would say most would not go up or down more than 50 points even if they went from 5% utili to 95%.

I think that your prediction there is way off. Most people see an average of 15-20 points for each threshold crossing on aggregate utilization, so when summed up that's 90-100 points right there. Then you have to factor in highest balance card and number of cards with balances, two more factors here that when aggregate utilization is maxed out are surely at play. 100 points is about the average I've seen from reading on this forum. Are there examples of only 50 points? Maybe, but they'd definitely be an outlier.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Carlosjb3 — Wed, 19 Sep 2018 06:08:35 GMT

@Thomas_Thumb wrote:
If the OP is on a dirty scorecard, impact of utilization is given a lower signal strength than on clean scorecards. Dirty scorecards assign a large portion of scorecard points toward status of derogatory attributes. There may be a smaller upside on optimizing utilization for profiles with derogatories.

It would be nice to get before/after score data points from the OP on the drop in utilization.

I have total revolving debt of $2,950 in total out of $3,000 available credit which puts me roughly at 98%. I will pay down $2,920 leaving about $30 bucks on my secured Discover card. I have a limit of $1,200 on Discover so my balance would be .025% of my limit. The Capital One secured card and PendFed overdraft line of credit will be at $0 balance. Overall debt to available credit will be 1% ($30 balance out of $3,000). I will start paying this debt in its entirety starting tomorrow and I will report the difference in scoring when going down from 98% to 1% utilization. I hope 1% utilization isn't too low.

Current FICO 8 scores as of now before debt paydown:

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Shooting-For-800 — Wed, 19 Sep 2018 10:33:27 GMT

I think 100 points is a stretch for the median.

I have gone from 1% to over 30% including 90% on a card (0%) and dropped maybe 12 points.

Of course, MMV but 100 is hard to imagine as a median drop.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Carlosjb3 — Wed, 19 Sep 2018 13:53:16 GMT

@Shooting-For-800 wrote:
I think 100 points is a stretch for the median.

I have gone from 1% to over 30% including 90% on a card (0%) and dropped maybe 12 points.

Of course, MMV but 100 is hard to imagine as a median drop.

It seems that you only did this with one card though, we are talking overall utilization on all cards combined. I can almost guarantee you that maxing out all your cards at the same time will result in more than just a 12 point drop.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Anonymous — Wed, 19 Sep 2018 14:35:54 GMT

@Shooting-For-800

@Shooting-For-800I think 100 points is a stretch for the median.

I have gone from 1% to over 30% including 90% on a card (0%) and dropped maybe 12 points.

Of course, MMV but 100 is hard to imagine as a median drop.

It shouldn't be. Revolving utilization makes up the largest portion of the second largest sector (amounts owed) of the FICO pie. That slice of the pie comprises 30% of your score, so revolving utilization easily constitutes 20% of that, maybe even up to 25%. So, you do the math. It's not hard to see that 100 points is perfectly normal in going from a best case to worst case revolving utilization scenario, or vice versa.

As TT explained earlier, signal strength with respect to utilization is different for dirty vs clean files. Is it out of the question to see only 50 points of movement in going from best case to worst case utilization? Maybe not, but for every person that falls into that range you'll have 9-10 others that come in somewhere around 100 points. You can find references all over this forum from members stating their change from the utilization change described above... 84 points, 110 points, 93 points, etc. I can't say personally that I've ever seen anyone reference only 50 points from such a change. 100 points without question is more of a median than 50 points.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Shooting-For-800 — Wed, 19 Sep 2018 21:29:55 GMT

ok.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Carlosjb3 — Thu, 20 Sep 2018 16:48:59 GMT

Alright, I paid down all of my revolving debt down to 0 balance with the exception of 1 credit card (Discover Secured card) in which I left a small balance just so it would report overall utilization percentage between 1% and 3%. I will report on the outcome in scores once my credit report updates.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Shooting-For-800 — Thu, 20 Sep 2018 18:47:07 GMT

@Carlosjb3 wrote:
Alright, I paid down all of my revolving debt down to 0 balance with the exception of 1 credit card (Discover Secured card) in which I left a small balance just so it would report overall utilization percentage between 1% and 3%. I will report on the outcome in scores once my credit report updates.

Awesome!

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Anonymous — Fri, 21 Sep 2018 07:56:31 GMT

@Carlosjb3Alright, I paid down all of my revolving debt down to 0 balance with the exception of 1 credit card (Discover Secured card) in which I left a small balance just so it would report overall utilization percentage between 1% and 3%. I will report on the outcome in scores once my credit report updates.

Congratulations. That's a great accomplishment and your new FICO scores will give you a nice pat on the back once they update.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Thomas_Thumb — Fri, 21 Sep 2018 17:38:07 GMT

@Carlosjb3 wrote:
@Thomas_Thumb wrote:
If the OP is on a dirty scorecard, impact of utilization is given a lower signal strength than on clean scorecards. Dirty scorecards assign a large portion of scorecard points toward status of derogatory attributes. There may be a smaller upside on optimizing utilization for profiles with derogatories.

It would be nice to get before/after score data points from the OP on the drop in utilization.
I have total revolving debt of $2,950 in total out of $3,000 available credit which puts me roughly at 98%. I will pay down $2,920 leaving about $30 bucks on my secured Discover card. I have a limit of $1,200 on Discover so my balance would be .025% of my limit. The Capital One secured card and PendFed overdraft line of credit will be at $0 balance. Overall debt to available credit will be 1% ($30 balance out of $3,000). I will start paying this debt in its entirety starting tomorrow and I will report the difference in scoring when going down from 98% to 1% utilization. I hope 1% utilization isn't too low.

Current FICO 8 scores as of now before debt paydown:

FYI - $30/$1200 = 2.5% which is still top tier for utilization.

As far as being too low even a utilization of 0.1% to 0.5% on a personal credit card is not a problem as that is still being reported as recent revolving activity.

Look forward to your after posting with updated scores.

Re: Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

Carlosjb3 — Sat, 22 Sep 2018 21:21:54 GMT

Thanks for the knowledge guys! It has helped tremendousy! Before I found out about this forums it was like I was driving blindfolded in regards to credit management.

Just a quick sidenote on Transunion. On 9/19/2018 I woke up to a pleasent surprise. A collection account from AT&T Uverse had just fallen off from the face of the Earth! I don't understand though. I burned AT&T Uverse 4 years ago so it hasnt been nowhere close to 7 years yet. The amount of the collection was for $320 and the collection agency is/was ERC. Anyhow, as a result Transunion jumped 45 points! As for Experian I didn't see no score change from those bastards when the collection fell off.

I did contact AT&T about 10 days ago before the collection fell off letting them know that I want to pay them what I owe at the end of this month contingent on them recalling the collection back. The AT&T rep didn't make me any promises and simply advised to call them back at the end of the month. Do you guys think they recalled the collection back? I just can't explain why the collection fell off well under the 7 year mark and now I'm wondering if it will sneak back up on me in the future after paying AT&T!

So below are my updated FICO scores now before my utilization on revolving balances are updated:

I wonder if once my overall utilization / card balances updates to optimal range if I will break into the 700's accross all 3 bureaus or at least on one of them? I have not seen 700 scores for over 10 years now. That is how irresponsible I've been with credit management. It has been almost 3 years now since I really started to take a hard look at my finances and making the decision at a disciplined approach towards better financial management.

Thanks once again guys!