topic Re: Keep 0% or 7% utilization? in Understanding FICO® Scoring

Keep 0% or 7% utilization?

omgitsMatt — Wed, 20 Feb 2019 02:12:33 GMT

What, strictly concerning a credit score, is better?

Lenders like utilization of some sort, but what makes a better score?

I'm going to apply for a credit union CC and they don't care if I have revolving debt, I am confident I'll get what I want.

Discover, Cap One, Credit One etc likes a revolving debt of some kind but I'm not applying there, at least right now

What is better for my raw credit score, thoughts anyone?

Re: Keep 0% or 7% utilization?

Anonymous — Wed, 20 Feb 2019 02:34:51 GMT

There is a score penalty for no revolving utilization and there is a score penalty on some at 8.9% although recent DPs suggest there is a small one around 5% too.

Realistically charging $5 a month and paying the statement in full should be high enough to avoid them forgiving the debt and low enough to avoid crossing a utilization threshold.

Re: Keep 0% or 7% utilization?

thornback — Wed, 20 Feb 2019 02:37:00 GMT

0% utilization will yield a FICO penalty for having 'no revolving credit usage' - folks report a loss of anywhere from 10-20 points; the actual point loss is profile specific - but 0% util always results in a loss of points for FICO 8. Anything from 2% - 7% aggregate util is ideal.

Re: Keep 0% or 7% utilization?

Anonymous — Wed, 20 Feb 2019 02:44:33 GMT

@omgitsMatt wrote:

Discover, Cap One, Credit One etc likes a revolving debt of some kind but I'm not applying there, at least right now

What is better for my raw credit score, thoughts anyone?

I think you are confusing "debt" with a reported balance or not. In order to maximize your FICO scores, you want to have one reported (small) balance on a revolving account. This doesn't mean you have "debt" as you can allow this small (say, $5-$20) balance to report and then immediately pay it off. Your "debt" is $0, but the reported balance will allow your FICO scores to be 15-20 points higher than if you reported all $0 balances across all revolvers.

A small reported balance (verses all $0 balances) without question and unarguably is better for your FICO scores.

Re: Keep 0% or 7% utilization?

omgitsMatt — Wed, 20 Feb 2019 08:17:01 GMT

Oops.

2/3 of my accounts report at zero

0/300 Primary User
0/1500 Authoritied User
206/3500 Authorized User

The 206/3500 is reporting at 2565 actually atm, but in a few days it'll update.

If I take the 300 and the 1500 up to 6% like the 3500 how long before it'll bounce back?

What happened was I paid down the 1021/1500 to zero just before monthly statement cut.

I almost did the same with 3500 (tax return money btw)

Close call.

I only saw an increase on Transunion from
725 to 731

But all three reflected the new balance, so they know too.

Equifax and Experian stayed at 704 and 719, no increase OR drop.

Is this normal?

With your help at informing about utilization and not dropping the 3500 to zero was I able to prevent that 10 to 20 point score drop?

Re: Keep 0% or 7% utilization?

omgitsMatt — Wed, 20 Feb 2019 08:15:46 GMT

Edit/

Accidentally pressed post with typing mssg, phone fumble mistake

Re: Keep 0% or 7% utilization?

omgitsMatt — Wed, 20 Feb 2019 08:13:45 GMT

I was, thank you. I'll remember that so I dont confuse folks when asking for help

I understand the difference now

Car loan, student loan, mortgage is debt?

CC balances is revolving credit?

Re: Keep 0% or 7% utilization?

Anonymous — Wed, 20 Feb 2019 13:34:55 GMT

@omgitsMatt wrote:

CC balances is revolving credit?

No, credit card balances are revolving debt. It's important to not confuse credit card debt with a reported balance, though. Someone can have a balance of $8000 on a $10000 credit card. They have $8000 of debt. They pay off $7995 of it, leaving a $5 balance just before statement cut. The CCC reports $5 to the bureaus; this is your reported balance. 2 days later, this person pays off the $5 balance to $0. That $5 reported balance will remain on the person's CR for the next 30 days until the CCC reports a new balance. This person however has no current revolving debt at all, as it's all paid off.

Re: Keep 0% or 7% utilization?

omgitsMatt — Thu, 21 Feb 2019 02:08:12 GMT

Got it now, I totally get it

Thanks again for clarifying that, I was still a bit confused I see now

Re: Keep 0% or 7% utilization?

Anonymous — Thu, 21 Feb 2019 02:21:21 GMT

All good. When I first found this forum I needed clarification on that several times too, as it can be confusing.

Re: Keep 0% or 7% utilization?

Anonymous — Thu, 21 Feb 2019 02:35:04 GMT

You mention that the only card of yours with a positive reported balance is an AU card. AU cards are sometimes ignored by the FICO 8 algorithm. Thus it is possible to have an AU card with a positive balance and a card in your name with a zero balance, and FICO might treat that as all cards at zero.

BBS can explain to you a way of testing whether or not your AU cards are being counted by the FICO 8 algorithm.

Down the road you should have a goal of having 3+ cards in your own name.

Re: Keep 0% or 7% utilization?

omgitsMatt — Thu, 21 Feb 2019 06:15:19 GMT

Both were maxed out when I got on as an AU, I paid down partially, but significantly each time, over the last 3 months and each staggered payment increased my scores significantly

Not this time though, just 725 to 731 on TU, nothing on the others

I'm currently putting all three to 5.9% a piece, we'll see in a month what happens

Fingers crossed

Re: Keep 0% or 7% utilization?

Anonymous — Thu, 21 Feb 2019 11:46:51 GMT

Are you choosing to have all three cards report at 5.9% -- because you think there might be some sort of scoring advantage?

There is no way that will help you. As BBS indicated earlier, you will maximize your score (from the perspective of CC balances) by having all cards at $0 except one, with the remaining card reporting a small positive balance.

The remaining card should not be an AU card, unless you have gone through the test to determine whether or not FICO 8 is ignoring it. BBS and others can walk you through that test if you are interested.

Re: Keep 0% or 7% utilization?

Anonymous — Fri, 22 Feb 2019 20:30:08 GMT

How do you avoid paying interest on the ramining 5.00?? I always get confused on the time tables from date of charge to date interest actually acrues?

Re: Keep 0% or 7% utilization?

Anonymous — Fri, 22 Feb 2019 20:39:23 GMT

What i mean is say today is the 15th of the month and i get paid on the 30th. I charge 800.00 on my card and pay back 795.00 on the 30th when i get paid and my statement drops on the 4th of the month. My due date on the statement is the 13th ? so if i pay the 5.00 now between the 5th and the 10th i dont pay interest? but the 5.00 reported to the bureau only which shows a very small utilization?

Re: Keep 0% or 7% utilization?

Anonymous — Fri, 22 Feb 2019 21:55:20 GMT

Pretty much.

When your statement prints you'll have a statement balance. This is typically what reports to the bureaus. Say it's $100. This means you need to pay that $100 statement balance in full by the due date, which may be (say) 3 weeks out. During those 3 weeks, chances are you'll make additional purchases. Your balance by the time your due date comes may then be greater, say $300. All you have to do here is pay the $100 statement balance to avoid paying any interest. Anything additional will simply lower your next statement balance. Say you pay $275. You've satisfied your $100 statement balance, plus paid another $175 which would then result in a $25 statement balance. Then for the next month you'd have to just paid that $25 in order to avoid interest.