topic Re: Score Increase from Lowering Util in Rebuilding Your Credit

Score Increase from Lowering Util

Anonymous — Thu, 16 Feb 2012 20:11:50 GMT

I am working on getting the max possible score over the next month to try for an auto refinance.

Anyway, my situation is that I have a couple very old collections (5-7 years) and a couple about 2-3 years old. I have a good credit card with perfect history that is 20 months old and another that is 7 months old. I also have many student loans that range from 6 months to 12 months old. I am currently working on any possible PFDs for those collections, but not going to count on that.

My current utilization is about 77%. I just made payments on both cards to bring them down to about 25%, so they will next report those balances. My question, is that a good balance? I have read that to max your score, you want 0% on all but one that is like 5-9%. However, I don't think I'm quite in the category of maxing scores with my poor credit. Is there much to gain by paying them from 25% down to 10% or would that be minimal? I would rather hang on to that money until next month in savings if the gain isn't gong to be much.

Thanks!

Re: Score Increase from Lowering Util

pizzadude — Thu, 16 Feb 2012 20:18:22 GMT

Talk with the bank or CU that you will be using for your refi, they should be able to tell you the rates they offer with the corresponding score ranges. After your balances are reporting paid down , check your FICO score to see where you land. Based on that you can decide to either pay more on your revolving debt to increase your score, or keep the money if you are ok with the interest rate as is.

Re: Score Increase from Lowering Util

namvet — Thu, 16 Feb 2012 20:19:12 GMT

@Anonymous wrote:
I am working on getting the max possible score over the next month to try for an auto refinance.

Anyway, my situation is that I have a couple very old collections (5-7 years) and a couple about 2-3 years old. I have a good credit card with perfect history that is 20 months old and another that is 7 months old. I also have many student loans that range from 6 months to 12 months old. I am currently working on any possible PFDs for those collections, but not going to count on that.

My current utilization is about 77%. I just made payments on both cards to bring them down to about 25%, so they will next report those balances. My question, is that a good balance? I have read that to max your score, you want 0% on all but one that is like 5-9%. However, I don't think I'm quite in the category of maxing scores with my poor credit. Is there much to gain by paying them from 25% down to 10% or would that be minimal? I would rather hang on to that money until next month in savings if the gain isn't gong to be much.

Thanks
The magic number is 30% or less on your utilization. Hang on to your money. Less is always better but 25% is good.

Re: Score Increase from Lowering Util

Anonymous — Thu, 16 Feb 2012 20:20:43 GMT

The CU I would be using uses Experian, a score I can't get unfortunately.

Re: Score Increase from Lowering Util

pizzadude — Thu, 16 Feb 2012 20:30:39 GMT

@Anonymous wrote:
The CU I would be using uses Experian, a score I can't get unfortunately.

Ask them to pull your credit a month or so before your want to refi ~ then you can go with their rates as is, or pay down your balances as needed. When they pull your score again it should count be scored as a single inquiry by FICO if it is within the 30~45 days scoring window, and assuming that the CU codes the inquiries as AUTO inquiries.

Re: Score Increase from Lowering Util

Anonymous — Thu, 16 Feb 2012 21:28:25 GMT

Thanks for the input everyone. Does anyone have any idea what kind of score increase I might see going from 77% to 25%? I know nobody can really know, but just curious to see some educated guesses from people who know more than me. Thanks!

Re: Score Increase from Lowering Util

payingoffdebt001 — Fri, 17 Feb 2012 01:14:45 GMT

Have you tried using the Fico Score Simulator? I dont know how accurate it is -but I too paid down some cards and I'd be happy with even the low end its saying I might receive.

Re: Score Increase from Lowering Util

namvet — Fri, 17 Feb 2012 01:23:53 GMT

@Anonymous wrote:
Thanks for the input everyone. Does anyone have any idea what kind of score increase I might see going from 77% to 25%? I know nobody can really know, but just curious to see some educated guesses from people who know more than me. Thanks!

Hard to answer but my educated guess would be around 30 points.

Re: Score Increase from Lowering Util

Anonymous — Fri, 17 Feb 2012 01:28:17 GMT

I did try the simulator here at myFico. I simulated paying off all my cards in a month and it said the score would go from 632 up to 632-674.

Re: Score Increase from Lowering Util

namvet — Fri, 17 Feb 2012 01:35:18 GMT

@Anonymous wrote:
I did try the simulator here at myFico. I simulated paying off all my cards in a month and it said the score would go from 632 up to 632-674.

Better than my guess! Keep us posted!

Re: Score Increase from Lowering Util

Anonymous — Fri, 17 Feb 2012 05:49:58 GMT

This is a very good question regarding utl. However, I would like further elaborate this question since jimbo situation is similar to mine. I did the score simulator paying down my open ccs to 0 and it improves 100 points, but would charge offa and collection be counted towards utl? I pulled my cr with annualcreditreport.com and it states my utl is only 5%.hopefully what I'm asking makes sense

Re: Score Increase from Lowering Util

Anonymous — Fri, 17 Feb 2012 14:36:05 GMT

@Anonymous wrote:
This is a very good question regarding utl. However, I would like further elaborate this question since jimbo situation is similar to mine. I did the score simulator paying down my open ccs to 0 and it improves 100 points, but would charge offa and collection be counted towards utl? I pulled my cr with annualcreditreport.com and it states my utl is only 5%.hopefully what I'm asking makes sense

Charge offs and collections do not count towards utilization. You will see zero effect on your score by paying charge offs and collections because a paid one hurts just as bad as an unpaid one. Utilization only counts open revolving accounts (it excludeds installments like mortgage and auto loans, etc).

Re: Score Increase from Lowering Util

Anonymous — Fri, 17 Feb 2012 14:55:33 GMT

Currently I have a balance of 54000 on my score simulator but this is inclusive of charge offs, I put in paying 100 a month for 12 months and my score jumped to almost 100 points, is the simulator counting towards charge offs as well, it's so confusin! Also the paying on time scenario, do charge offs inclusive as well?

Re: Score Increase from Lowering Util

GoodCredBen — Fri, 17 Feb 2012 14:58:08 GMT

it is only counting towards curring credit balances.

Re: Score Increase from Lowering Util

MarineVietVet — Fri, 17 Feb 2012 17:42:25 GMT

@Anonymous wrote:

Charge offs and collections do not count towards utilization. You will see zero effect on your score by paying charge offs and collections because a paid one hurts just as bad as an unpaid one. Utilization only counts open revolving accounts (it excludeds installments like mortgage and auto loans, etc).

There is one situation in which a CO does count toward utilization. If the CO is a credit card and both the credit limit and balance are reporting then this account is factored into utilization. In this case paying off the balance will help your score by lowering utilization.

Re: Score Increase from Lowering Util

Anonymous — Fri, 17 Feb 2012 17:44:26 GMT

@MarineVietVet wrote:
There is one situation in which a CO does count toward utilization. If the CO is a credit card and both the credit limit and balance are reporting then this account is factored into utilization. In this case paying off the balance will help your score by lowering utilization.

Thanks for pointing that out!

Re: Score Increase from Lowering Util

MBOhio2 — Fri, 17 Feb 2012 17:49:59 GMT

@namvet wrote:
@Anonymous wrote:
I am working on getting the max possible score over the next month to try for an auto refinance.

Anyway, my situation is that I have a couple very old collections (5-7 years) and a couple about 2-3 years old. I have a good credit card with perfect history that is 20 months old and another that is 7 months old. I also have many student loans that range from 6 months to 12 months old. I am currently working on any possible PFDs for those collections, but not going to count on that.

My current utilization is about 77%. I just made payments on both cards to bring them down to about 25%, so they will next report those balances. My question, is that a good balance? I have read that to max your score, you want 0% on all but one that is like 5-9%. However, I don't think I'm quite in the category of maxing scores with my poor credit. Is there much to gain by paying them from 25% down to 10% or would that be minimal? I would rather hang on to that money until next month in savings if the gain isn't gong to be much.

Thanks
The magic number is 30% or less on your utilization. Hang on to your money. Less is always better but 25% is good.

This is one of those things that really varies from person to person and in fact, many people report that they got a large bump when they went under 20%. These are certain "sweet spots" that people tend to report increases at, both of which are 30% and 20% but I do not think it is universally accepted that 30% is the magin number and typically, people do see increases (sometimes large ones) when they go under 30%, under 20%, under 9%, etc.

Re: Score Increase from Lowering Util

Anonymous — Fri, 17 Feb 2012 17:51:20 GMT

Thanks for the feedback everyone. It looks like there are still decent gains to be had by going lower. I already paid my wife's CC off in full today, and I will get mine down to 5% before it reports on the 3rd. Thanks again!

Re: Score Increase from Lowering Util

namvet — Fri, 17 Feb 2012 18:08:46 GMT

@Anonymous wrote:
Thanks for the feedback everyone. It looks like there are still decent gains to be had by going lower. I already paid my wife's CC off in full today, and I will get mine down to 5% before it reports on the 3rd. Thanks again!

Remember one thing. Credit scores are all about risk to the lender. These scores were developed many years ago to cut down charge offs (defaults) on consumer loans. Loans that did not perform were looked at and certain information appeared more than other information such as: Time on job, amount of debts, home owner,credit history,types of credit etc. One factor was clear and still is today. Less debt means less risk.