Credit Utilization Ratio applies to all cards combined or by each one?

[haulingthescoreup]

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GregB wrote:

Call the utilization steps "buckets" or "tiers", I wonder what FICO calls them. I do feel that the ranges are a bit coarser than your suggestion. Or possibly the "steps" are that fine but it takes more than one "step" to change your score. Wait, that means there is no reason to have three digits in your FICO score.......... I guess we will never know reality as dictated by the FICO gods....

I can tell you that a few months ago my Kohl's charge went from $54 to $360 against a $1500 limit. That changed my FICO score a few points according to Scorewatch.

I recently got an alert that my Advanta went from $1692 to $6525 against a $18000 limit. The alert said "The balance on one of your accounts has increased by $4833. Your score is 734 and has not changed since March 1, 2009". I have noticed a similar pattern in the past where small changes sometimes affect scores and large changes sometimes don't. I'm tossing out the ones where the number of accounts with balances changes as that throws in another variable.

The score changes that I am noticing on individual CC accounts seem to be caused by 0%, 1-10%, 10-80%, 80-100% or something similar. The overall utilizations seem finer than that, of course.

Opinions?

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They're called scorecards.

And tiers and buckets are not interchangeable terms. You are assigned to a bucket (scorecard; score profile) because of various factors on your report that cause you to be grouped with credit peers. Presence of a collection --you're in the serious derog bucket, regardless of length of history, 30 day lates, etc. Collection and a tax lien --you're in the serious derog + public record bucket. These are the two negative buckets, and they trump any other possible assignment in the eight positive buckets.

Interesting about the balance increase. What's your overall util, not just that on the card?

[Cleanmachine]

Credit utilization applies to all aspect of your credit profile.

Mortgages, Installments, Revolving and Other Accounts are all factored in for scoring purposes.

There are also other formulas that are used such as to the Region where you live, including the State, County, City and zip codes. Financial Institutions also use your occupation as a determining factor of your credit worthiness.

Trying to nail down a precise factor in scoring is really an effort in futility.

However, I do have to admit, this is one of the most informative post I have read in a long time.

[haulingthescoreup]

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Cleanmachine wrote:

Credit utilization applies to all aspect of your credit profile.

Mortgages, Installments, Revolving and Other Accounts are all factored in for scoring purposes.

There are also other formulas that are used such as to the Region where you live, including the State, County, City and zip codes. Financial Institutions also use your occupation as a determining factor of your credit worthiness.

Trying to nail down a precise factor in scoring is really an effort in futility.

However, I do have to admit, this is one of the most informative post I have read in a long time.

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True about the util, but revolving util is calculated separately from the others, and it's a huge score driver. Installment util is in its own little world, and has much less punch for FICO scores.

It's very true that lenders look at lots of things that you mentioned, and rightfully so. Geographic location is NOT factored in your FICO scores, although there is an ancient PowerPoint presentation that pops up every now and again that implies that it does.

What's Not in Your FICO® Score

FICO scores consider a wide range of information on your credit report. However, they do not consider:

* Your race, color, religion, national origin, sex and marital status.
US law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act.
* Your age.
Other types of scores may consider your age, but FICO scores don't.
* Your salary, occupation, title, employer, date employed or employment history.
Lenders may consider this information, however, as may other types of scores.
* Where you live.
* Any interest rate being charged on a particular credit card or other account.
* Any items reported as child/family support obligations or rental agreements.
* Certain types of inquiries (requests for your credit report).
The score does not count “consumer-initiated” inquiries – requests you have made for your credit report, in order to check it. It also does not count “promotional inquiries” – requests made by lenders in order to make you a “pre-approved” credit offer – or “administrative inquiries” – requests made by lenders to review your account with them. Requests that are marked as coming from employers are not counted either.
* Any information not found in your credit report.
* Any information that is not proven to be predictive of future credit performance.
* Whether or not you are participating in a credit counseling of any kind.

What's NOT in Your Score

I'll bet most of us have not read the Credit Education tab up at the top of these pages. Lots of good stuff in there

[GregB]

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@haulingthescoreup wrote:

..........
Interesting about the balance increase. What's your overall util, not just that on the card?

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The two recent Equifax reports that show 734 FICO show 41% and 39%.  These were both after the hit from the Kohl's increase and before the no change from the $4833 increase on on Advanta.

Thanks for the explaination on "buckets".

[CreditAble]

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haulingthescoreup wrote:
There are different tiers, for lack of a better term, for revolving util. Under 10%, 10 - 19%, 20 - 29%, 30 - 49%, 50 - 84% or so, and then above that, which equals maxed.

I wouldn't give you a nickel for the accuracy of these ranges,

but it's something like that, from what we read when we compare notes.

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 I have a lot of experience with taking 0% BTs for investment purposes.

 During the past 4 years or so my scores ranged between 770 & 800.. Generally I don't (usually) borrow more than 50% individual utility. I have never had a BT on more than one card at a time. By staying under 50% (individual) utility I have never seen as much as a 25 point score drop. 

That experience leads me to discipline myself to stay under 50% individual utility. I don't really pay much attention to overall utility since it is always quite low due to my reasonably high CLs on all cards. I believe that overall utility hasn't ever exceeded 24% .

For my credit profile, that means that (individual) utilization doesn't hurt more than 15 - 20 points 90% of the time.

Now that I have qualified my observations,

I want to address the conventional opinions about scoring tiers.

I have never seen any evidence of a major score change that I could state positively was the result of some "tier" change. I basically believe that the scores change incrementally without much regard to plateaus or tiers.

I have always been in the habit of making uniform monthly payments to retire the balance of the BT. Because I made uniform monthly payments of $!,000 or $2,000 I would have been able to observe any major tier change. I never saw any evidence of a major score change at a "magic moment". All monthly score changes were only incrementally lower by a few points each month. I did come to the conclusion that as I borrowed increasingly more amounts ( to justify CLIs ), there was not as much of a score ding for remaining (rather large) balances on each subsequent BT. That translates into almost no score hit for individual balances in the 15-20% individual utility range.

I therefore conclude that the majority of my score recovery took place inclemently when I was closer to 50% utility. As I approached 10% individual utility my scores increased much slower. Of course between 10% and 0% there wasn't more than 2- 5 points left to be gained.

I have yet to see someone clearly document utility tiers. That however is a moot point however. I know that if I were to have more than 50% utility on even one tradeline, I could have in excess of a 25 point drop. I don't want that. The majority of the score recovery takes place between 50% and 25 or 30% (individual) utility. That is close enough for my FICO score expectations.

As far as I am concerned

the 50%, 30%, 20% individual utility goals work for me. My primary objective is to maintain reasonable high FICO scores while still carrying some balances, in order to make some profit using other people's money. 

I will point out that overall utility might actually have some kind of tiers. I just have seen no evidence of tires at all. I have however stayed pretty much below 25% overall utility and a tier change might actually take place at 30%.

Based upon info available in blogs and forums.

I have concluded, that 80% and above overall utility is pretty much a score killer. Paying down to 70% is a goal worthy of extreme sacrifice. One could lighten up on the 24/7 obsession with lowering utility once below 70%. Lowering the utility from 70% to 50%, should still be the number one priority in a person's life, but an occasional dinner and movie should be permissible without guilt. Once the highest balance on one card is below 50% with no balances left on all tradelines, a person can begin to relax a little. I am not saying that debt shouldn't be completely paid off as fast as possible. I am simply outlining some "arbitrary" goals that will achieve a higher fico score as fast as possible.

Using tiers as a goal is very useful to provide a similar incentive to pay down debt.

I am just not so sure that anyone can really make any definitive statements about the accuracy of tier percentages.

I agree with you Hauling.

I will not risk a nickel to bet that tiers are that important for scoring purposes.

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edit: sorry to jump on your post, but I saw a typo of mine from the post you quoted. I meant to type 49%, not 45%. I didn't change anything of yours. --hauling

Message Edited by haulingthescoreup on 04-03-2009 04:02 PM

[GregB]

I would agree with you about the 25 point max hit for running even a high limit card near the max. I have a history from Scorewatch and Equifax FICO scores from a period where I did the following:

1. I owed approx $20,000 against $180,000 limit on revolving accounts that showed on my reports. That is about 11% utilization. My FICO was 745.

2. I did one BT for $40,000 against a $46,000 limit, so 87% on that card, 33% total utilization. This paid down my Amex Capital Line, which did not show on my personal reports. Therefore all FICO could see is a huge increase in debt.

3. The Scorewatch alert says "Your FICO score decreased to 719. BofA XXXXX New Balance $40,086" That is the $40,000 BT, the $75 fee, and the $11 previous balance. That is a drop of 26 points due to the maxing of one card AND the increase in overall utilization.

This one transaction is unique in that I have the FICO report immediately before the BT and my reported balance on the account before the BT was NOT zero. This removes the additional variable of increasing the number of accounts with balances, or inactive accounts, etc.

[haulingthescoreup]

And just to keep the confusion rolling, we've had posts by several members, including a few that I think are pretty believable, saying that they ran the util up on just one card quite high --85% and more --and there was no ding, as long as the total util didn't change appreciably. As soon as they tried it with a second card, wham.