topic Re: 100% Util in Rebuilding Your Credit

100% Util

BundiFan — Tue, 08 Mar 2011 22:11:39 GMT

My transunion is currently at 625 with 100% util on my CC's I am paying them all off this week about $2700's worth. What kind of score jump could I see when they finally post?

Re: 100% Util

ScoreBooster — Tue, 08 Mar 2011 22:16:46 GMT

I'd say a massive one. Did you try the score-simulator?

Re: 100% Util

BundiFan — Tue, 08 Mar 2011 22:24:52 GMT

Nope don't know how... I just purchased my fico score here today.

Re: 100% Util

ScoreBooster — Tue, 08 Mar 2011 22:37:52 GMT

@SBUNDICK wrote:
Nope don't know how... I just purchased my fico score here today.

Yeah, it's easy to miss. It's a little link on top of your credit-report. Go to the "Score summary" and the link is in blue on the right top corner, next to the printer-link.

Re: 100% Util

BundiFan — Tue, 08 Mar 2011 23:03:23 GMT

It says it would jump to 675-705. How accurate is the calculator? would it really jump to that level or is it just a educated guess?

Re: 100% Util

ScoreBooster — Tue, 08 Mar 2011 23:16:12 GMT

@SBUNDICK wrote:
It says it would jump to 675-705. How accurate is the calculator? would it really jump to that level or is it just a educated guess?

I'd say it's quite accurate. It also depends on HOW you're planning on paying off your cards. The best thing is to have all accounts EXEMPT one report a $0 balance and a balance of about 2% of the total added credit-lines on the remaining account. This would really boost your score. Paying off ALL your cards COMPLETELY is not recommended.

Balances on CCs are a HUGE factor for your score. As far as I know, that utilization is responsible for 35% of your FICO.

Re: 100% Util

BundiFan — Tue, 08 Mar 2011 23:48:23 GMT

So you are saying it would be bad to goto 0% util and does it matter if the 2% is on one card or should I spread it around?

Re: 100% Util

ScoreBooster — Wed, 09 Mar 2011 00:03:49 GMT

@SBUNDICK wrote:
So you are saying it would be bad to goto 0% util and does it matter if the 2% is on one card or should I spread it around?

Creditors don't want to see a high util. because they consider that to be a risk. That makes sense. On the other hand, they don't want to see no credit-usage either because that's bad for their business, too. See for yourself on the simulator. If you enter the TOTAL balance you currently have as amount you will pay off, your score will be lower compared to a scenario where you would leave a balance of 2%.

So that's why 2% is better than 0%. Since many accounts with balances (no matter how low they actually are) is a "minus" as well, you want to have the entire balance on one account.

Let's say you have 5 CCs with a $100 credit-line each. You want 4 with a $0-Balance reported and the 5th at $10 - which is 2% of the total credit-limit of $500.

Re: 100% Util

BundiFan — Wed, 09 Mar 2011 00:20:52 GMT

Thanks for the information playing with that it made a 10 point difference on the low side. Can't wait to see it post next month

Re: 100% Util

ScoreBooster — Wed, 09 Mar 2011 00:49:23 GMT

@SBUNDICK wrote:
Thanks for the information playing with that it made a 10 point difference on the low side. Can't wait to see it post next month

You're welcome!

As a side note, beware of any "monthly fees" or interest that might be charged to your credit card at the closing-date. You might have to consider that as well.

I have a card that has a $6 mothly fee which is billed every month at the closing-date. So in order to avoid a reported balance on that account, I would have to pay more than the current balance. Same applies to CCs that have no grace-perid.

Re: 100% Util

MBOhio2 — Wed, 09 Mar 2011 15:39:30 GMT

I am going through the same process but my util % actually started at 125% because one of my CCs reduced the limit to way below the current balance ($100 limit, $1600 balance). Those jerks! I paid my util % down from 125% to about 80% and with only about half of that reporting as of today (so I'm at 90% now), I saw a 21 point jump from 520 to 541. Now of course, my starting point was much lower than yours, but util % has a HUGE impact on your score!

As others have said the score simulator is pretty accurate and, depending on the other factors on your report, you're likely to see somewhere around a 100 point jump!

Re: 100% Util

Anonymous — Wed, 09 Mar 2011 15:52:40 GMT

@ScoreBooster wrote:

@SBUNDICK wrote:
So you are saying it would be bad to goto 0% util and does it matter if the 2% is on one card or should I spread it around?

Creditors don't want to see a high util. because they consider that to be a risk. That makes sense. On the other hand, they don't want to see no credit-usage either because that's bad for their business, too. See for yourself on the simulator. If you enter the TOTAL balance you currently have as amount you will pay off, your score will be lower compared to a scenario where you would leave a balance of 2%.

So that's why 2% is better than 0%. Since many accounts with balances (no matter how low they actually are) is a "minus" as well, you want to have the entire balance on one account.

Let's say you have 5 CCs with a $100 credit-line each. You want 4 with a $0-Balance reported and the 5th at $10 - which is 2% of the total credit-limit of $500.

Close, but no - you want that 5th at $9 or less. The utilization is judged on each account as well as overall, and ideally you want less than 9%. I know it's just a 1% difference, but that threshold is at 9%, not 10%.

Re: 100% Util

ScoreBooster — Wed, 09 Mar 2011 16:53:21 GMT

@Anonymous wrote:

Close, but no - you want that 5th at $9 or less. The utilization is judged on each account as well as overall, and ideally you want less than 9%. I know it's just a 1% difference, but that threshold is at 9%, not 10%.

Interesting - I learned something new today. So if I got that right, the "balance-carrier" should be the CC with the highest CL, right?

So I guess if someone follows ALL these steps, your score should be at the higher edge of what the simulator predicts.

Re: 100% Util

Anonymous — Wed, 09 Mar 2011 17:11:10 GMT

It doesn't matter which card, as long as it's under 9% of that card's CL.

Re: 100% Util

Anonymous — Wed, 09 Mar 2011 18:53:08 GMT

I just went through a similar situation as the op.

My utilization was 77% in February 2011. I decreased it to 32% by March 2011. My TU score is now 65 points higher, EQ is 50 points higher and EX is 40 points higher. The simulation is not too accurate because it said I would only get a 10 point increase. If you decrease your utilization to 2%, I think you will see at least a 50 point jump on all 3 scores.

Re: 100% Util

ScoreBooster — Wed, 09 Mar 2011 19:43:06 GMT

@Anonymous wrote:
It doesn't matter which card, as long as it's under 9% of that card's CL.

But I guess it's safe to say that that is easier to accomplish on the account with the highest CL, right?

Re: 100% Util

Anonymous — Wed, 09 Mar 2011 19:49:53 GMT

Yes, it is easier to keep a higher limit card in that magical zone. However, it's also a common misconception that your CL affects your score in a direct way ($CL), as opposed to the indirect effect of % utilization.

Re: 100% Util

ScoreBooster — Wed, 09 Mar 2011 22:06:01 GMT

@Anonymous wrote:
Yes, it is easier to keep a higher limit card in that magical zone. However, it's also a common misconception that your CL affects your score in a direct way ($CL), as opposed to the indirect effect of % utilization.

That's true - and that myth is kept alive by several third party credit-report providers (i.e. CreditCheck Total) who are telling their customers their score is lower just because their CL (not util.) is low.

Re: 100% Util

MBOhio2 — Wed, 09 Mar 2011 22:12:59 GMT

Experian's CMS at freecreditreport.com also gives feedback on how your overall CLs are impacting your score... which I assume furthers the incorrect belief as well. It seems so bizarre to me that they would explicitly tell people that CLs matter when they don't!!

Re: 100% Util

Anonymous — Thu, 10 Mar 2011 19:24:27 GMT

@ScoreBooster wrote:

@SBUNDICK wrote:
So you are saying it would be bad to goto 0% util and does it matter if the 2% is on one card or should I spread it around?

Creditors don't want to see a high util. because they consider that to be a risk. That makes sense. On the other hand, they don't want to see no credit-usage either because that's bad for their business, too. See for yourself on the simulator. If you enter the TOTAL balance you currently have as amount you will pay off, your score will be lower compared to a scenario where you would leave a balance of 2%.

So that's why 2% is better than 0%. Since many accounts with balances (no matter how low they actually are) is a "minus" as well, you want to have the entire balance on one account.

Let's say you have 5 CCs with a $100 credit-line each. You want 4 with a $0-Balance reported and the 5th at $10 - which is 2% of the total credit-limit of $500.

For best FICO impact, the most quoted advice here is to keep all but one account reporting at zero; with that one account reporting less than 9% of its CL.

FICO scores you on both overall utilization and on individual card utilization. Utilization is rounded up. Some folks find 9% as something of a cutoff, so folks often avoid reporting more than 9% utilization on the one card that's reporting.

But you'll be in great shape anywhere in the vicinity.