topic Re: Best for Utilization strategy in Understanding FICO® Scoring

Best for Utilization strategy

dynamicvb — Wed, 23 Jan 2019 13:19:22 GMT

I think I'm right with this, but thought I would throw it out here to get some other opinions. I'm running balances on two cards at the moment. I have 3 total and one that I'm an AU on.

Last month, Discover had a utilization percentage of just under 8.9% and the Amex had a utilization of 38.6%. We had a death in the family and I put a little over 3K on my Discover and will be paid back 2K of that by Family members. Right now I've had 1500 of it paid to me( in the bank). I should get the other 500 in a couple of weeks. I put this on the card mainly for the cashback benefits and I did not want to dip into my emergency fund right now.

I could pay the Discover back down to where it was( almost), but it will still be over the 8.9% threshold even after I pay and this will mean I have to dip into my emergency fund.

Right now with these additional charges, the Discover is setting at 25.9%. I got to thinking on the way in this morning that it would likely make more sense in terms of the scores for me to let the Discover balance report the current amount and take the money for the Funeral expenses and just pay off the Amex. I had already planned to pay down the Amex to under 29% this month and this could take it to 0 or if I leave a little less than 8.9% and pay the rest of the 2K on the Discover which will bring it down to around 22%.

If I just pay the Amex down to less than 29% as I originally planned and then pay all the funds to the Discover its still going to be around 12% utilization. So I would then have the two cards with balances both over 8.9% and below the 28.9% threshold.

In terms of scores, it seems paying the Amex off to 0 would be the best move for me to make even if I let me Discover cross the 8.9% threshold. I should mention both of these cards have 0% interest right now so that is not a factor. This would put me at one card between 8.9% and below 28.9% and all the other cards at 0.

Hopefully, this is clear. Thoughts?

Re: Best for Utilization strategy

Anonymous — Wed, 23 Jan 2019 13:32:45 GMT

Hello OP - this might help you.

Re: Best for Utilization strategy

Anonymous — Wed, 23 Jan 2019 13:38:08 GMT

Just something I'm not really clear on. You stated that you put expenses on a card mainly for the cash back benefit, which is great. The problem however is that by not paying in full, you're taking on interest which quickly erodes that CB; no doubt it's gone in a cycle or two at most.

Re: Best for Utilization strategy

Anonymous — Wed, 23 Jan 2019 13:39:40 GMT

The OP mentioned both cards are 0%

Re: Best for Utilization strategy

dynamicvb — Wed, 23 Jan 2019 13:49:40 GMT

Yeh, there is no interest on either card and I still have enough time to pay them both off to 0 long before I incur any interest regardless of which way I go.

Re: Best for Utilization strategy

dynamicvb — Wed, 23 Jan 2019 13:58:16 GMT

@Anonymous wrote:
Hello OP - this might help you.

So there is a 19% threshold? I did not realize that was one for a score drop, but it still seems I'm on the right track just in terms of what will mean the less amount of damage to my scores.

Re: Best for Utilization strategy

Anonymous — Wed, 23 Jan 2019 13:56:21 GMT

I'm not exactly sure OP - I believe this was created by ABCD2199 who is a well respected senior poster. But I haven't seen he/she on the board recently.

Re: Best for Utilization strategy

SouthJamaica — Wed, 23 Jan 2019 16:56:27 GMT

@dynamicvb wrote:
I think I'm right with this, but thought I would throw it out here to get some other opinions. I'm running balances on two cards at the moment. I have 3 total and one that I'm an AU on.

Last month, Discover had a utilization percentage of just under 8.9% and the Amex had a utilization of 38.6%. We had a death in the family and I put a little over 3K on my Discover and will be paid back 2K of that by Family members. Right now I've had 1500 of it paid to me( in the bank). I should get the other 500 in a couple of weeks. I put this on the card mainly for the cashback benefits and I did not want to dip into my emergency fund right now.

I could pay the Discover back down to where it was( almost), but it will still be over the 8.9% threshold even after I pay and this will mean I have to dip into my emergency fund.

Right now with these additional charges, the Discover is setting at 25.9%. I got to thinking on the way in this morning that it would likely make more sense in terms of the scores for me to let the Discover balance report the current amount and take the money for the Funeral expenses and just pay off the Amex. I had already planned to pay down the Amex to under 29% this month and this could take it to 0 or if I leave a little less than 8.9% and pay the rest of the 2K on the Discover which will bring it down to around 22%.

If I just pay the Amex down to less than 29% as I originally planned and then pay all the funds to the Discover its still going to be around 12% utilization. So I would then have the two cards with balances both over 8.9% and below the 28.9% threshold.

In terms of scores, it seems paying the Amex off to 0 would be the best move for me to make even if I let me Discover cross the 8.9% threshold. I should mention both of these cards have 0% interest right now so that is not a factor. This would put me at one card between 8.9% and below 28.9% and all the other cards at 0.

Hopefully, this is clear. Thoughts?

In individual card utilization the difference between 28.9% and 8.9% is not a very big deal. In my profile it wouldn't get you a single point in FICO 8. So yes I would go for zeroing out all but Discover.