topic Re: Credit Card Utilization Help in Understanding FICO® Scoring

Credit Card Utilization Help

Lmedrano — Tue, 03 Oct 2023 08:33:03 GMT

Hello,

Over the past years ive been repairing my credit report. I'm trying to get the highest score possible by paying all my credit cards before the statement closing date. What percentage should I be leaving in my CC? Do I pay them all and have a zero balance for the most optimal score or leave a minimal balance? I currently have the funds available to eliminate the debt but don't want my score to drop. My current FICO 8 score is EQ 625, TU 666, EX 646.

CC 1 -CL of $700 current balance $586

CC2 - CL of $300 current balance $0

CC3 - CL of $1000 current balance $211

CC4 - CL of $750 current balance of $366

CC5 - CL of $2000 current balance $2352

Combined credit utilization if my math is righ 74%. Should I bring all my cards to at least 9% balance or pay them all off.

Thank you for your help and advice in advance.

Re: Credit Card Utilization Help

JoeRockhead — Tue, 03 Oct 2023 08:55:04 GMT

Some might suggest practicing AZE0 for the optimal effects to your scores. It's also OK to have a small balance on each card as long as its low, 1% to 8.9%.

Once you go above 50% usage your score starts taking more significant hits. Any individual card utilization of 90%+ is considered maxed out and there will be heavy hit to your scores.

Get your balances paid down to under 9% on each card and you should see a nice improvement to your scores.

Re: Credit Card Utilization Help

FireMedic1 — Tue, 03 Oct 2023 10:56:41 GMT

This ^^^^^^^^ FICO also likes less than half your cards reporting and never have none report.

Re: Credit Card Utilization Help

SouthJamaica — Tue, 03 Oct 2023 16:29:22 GMT

@Lmedrano wrote:
Hello,

Over the past years ive been repairing my credit report. I'm trying to get the highest score possible by paying all my credit cards before the statement closing date. What percentage should I be leaving in my CC? Do I pay them all and have a zero balance for the most optimal score or leave a minimal balance? I currently have the funds available to eliminate the debt but don't want my score to drop. My current FICO 8 score is EQ 625, TU 666, EX 646.

CC 1 -CL of $700 current balance $586
CC2 - CL of $300 current balance $0
CC3 - CL of $1000 current balance $211
CC4 - CL of $750 current balance of $366
CC5 - CL of $2000 current balance $2352

Combined credit utilization if my math is righ 74%. Should I bring all my cards to at least 9% balance or pay them all off.

Thank you for your help and advice in advance.

If you want to absolutely optimize it, you should have 4 of the cards reporting a zero balance and one of the cards reporting a small balance.

Re: Credit Card Utilization Help

Thomas_Thumb — Tue, 03 Oct 2023 19:04:47 GMT

@Lmedrano wrote:
Hello,

Over the past years ive been repairing my credit report. I'm trying to get the highest score possible by paying all my credit cards before the statement closing date. What percentage should I be leaving in my CC? Do I pay them all and have a zero balance for the most optimal score or leave a minimal balance? I currently have the funds available to eliminate the debt but don't want my score to drop. My current FICO 8 score is EQ 625, TU 666, EX 646.

CC 1 -CL of $700 current balance $586
CC2 - CL of $300 current balance $0
CC3 - CL of $1000 current balance $211
CC4 - CL of $750 current balance of $366
CC5 - CL of $2000 current balance $2352

Combined credit utilization if my math is righ 74%. Should I bring all my cards to at least 9% balance or pay them all off.

Thank you for your help and advice in advance.

Given you have 5 cards, this is what I would recommend for best results:

1) Allow one or two cards to report a statement balance. Then pay those statement balances in full prior to their DUE dates.

- Fico does penalize for "no recent revolving activity". Atleast one account must report a positive, non zero, balance to show recent activity.

* One revolving account reporting a balance is sufficient to avoid the "no recent activity" penalty.

2) All your other cards should be paid to zero prior to their respective statement cut dates.

- Fico does penalize for too many accounts reporting balances. The penalty generally increases as the # accounts reporting balances increases.

* I have 5 cards as well and see no difference between 1 or 2 cards reporting. Having more than 2 report may cause a drop depending on the Fico model.

3) Reported balances should be "low". Statement balances are best kept under 9% of the card's credit limit to show a low utilization (UT) level.

- Fico penalizes if either individual card UT or aggregate UT get too high. Elevated aggregate utilization start to impact score at lower levels than individual UT.

* Under 29% UT on a card basis and 9% in aggregate are good benchmarks. However, under 9% on any cards that report balances simplifies things. It ensures aggregate UT will be under 9% regardless if the card(s) reporting have a high CL or low CL.

Re: Credit Card Utilization Help

Junejer — Wed, 04 Oct 2023 03:00:46 GMT

Hey @Lmedrano, welcome to the forums.

@Thomas_Thumbmade great recommendations. I'll double down on not allowing more than two of your cards to report a balance. For me, when I allow three cards to report balances, EQ tends to drop me down a few points. I have eight cards and an AU. My total balances $2, $55 and $129 and I lost two points when that third card reported a balance. My AU reports $5. EX doesn't care if I have 1 - 3 cards reporting low balances and TU seems to prefer that I have three versus two cards report.

I know most folks tout AZEO on this forum. I used to be one of them, when the main models were what we now call mortgage scores. But, with F8, AZEO is really not a thing that will cause a score bump or loss, given you have five cards.

You should see a nice bump when you get three cards to $0 and allow those other two to report small balances. CC5 is kicking your score's butt big time!

Re: Credit Card Utilization Help

Lmedrano — Wed, 04 Oct 2023 09:34:54 GMT

Thank you all for the great advised. Today I paid off all my cards to a zero balance. Closing dates are not till the middle and end of the month. I did noticed that my mortgage scores are significant low. Honestly that's what I'm working on to eventually be able to apply for a home in the future. Current mortgage scores are:

EQ609, TU591,EX647.

I'll probably leave an 5-8% balance on one card, my question is should this card be the one with the lowest or highest CL, or the older or newer one. Or it just does not matter.

Thank you again.

@Junejer wrote:
Hey @Lmedrano, welcome to the forums.

@Thomas_Thumbmade great recommendations. I'll double down on not allowing more than two of your cards to report a balance. For me, when I allow three cards to report balances, EQ tends to drop me down a few points. I have eight cards and an AU. My total balances $2, $55 and $129 and I lost two points when that third card reported a balance. My AU reports $5. EX doesn't care if I have 1 - 3 cards reporting low balances and TU seems to prefer that I have three versus two cards report.

I know most folks tout AZEO on this forum. I used to be one of them, when the main models were what we now call mortgage scores. But, with F8, AZEO is really not a thing that will cause a score bump or loss, given you have five cards.

You should see a nice bump when you get three cards to $0 and allow those other two to report small balances. CC5 is kicking your score's butt big time!

Re: Credit Card Utilization Help

coldfusion — Wed, 04 Oct 2023 10:39:30 GMT

@Lmedrano wrote:

I'll probably leave an 5-8% balance on one card, my question is should this card be the one with the lowest or highest CL, or the older or newer one. Or it just does not matter.

It really wouldn't matter since as most you're looking at a balance of less than $200. What would matter, since you'd in effect be following an AZEO process, is that the 1 card you are allowing to report a balance should be a bank card (e.g. Mastercard/Visa/Discover/AMEX credit card ) and not a store card.

Re: Credit Card Utilization Help

Lmedrano — Mon, 06 Nov 2023 19:02:14 GMT

Update: Thank you all for your help and advice. I was able to pay off all the credit cards to a zero balance and leave one card at 1%. Along with that I paid off one CC charged off account to a zero balance. The results are overwhelming, still have progress but it got the job done and now I closed on our home In 2 weeks! Thank you all for the help

FICO 8

EQ 673

TU 706

EX 701

Re: Credit Card Utilization Help

SouthJamaica — Mon, 06 Nov 2023 20:01:40 GMT

@Lmedrano wrote:
Update: Thank you all for your help and advice. I was able to pay off all the credit cards to a zero balance and leave one card at 1%. Along with that I paid off one CC charged off account to a zero balance. The results are overwhelming, still have progress but it got the job done and now I closed on our home In 2 weeks! Thank you all for the help

FICO 8
EQ 673
TU 706
EX 701

Congratulations

Re: Credit Card Utilization Help

Lmedrano — Thu, 23 Nov 2023 02:54:00 GMT

All,

We closed on our house two days ago! Thank you all for the advice and support. It was a uphill battle but we made it through.

Re: Credit Card Utilization Help

Junejer — Sat, 25 Nov 2023 19:31:45 GMT

@Lmedrano wrote:
All,
We closed on our house two days ago! Thank you all for the advice and support. It was a uphill battle but we made it through.

Congrats!!