Question about percentage of debt

[Anonymous]

Hi - I have three credit cards with about $30,000.00 worth of credit - I owe under 30% (in total) all on low balance transfers on two of my three cards - I use the other card and pay off every month.  I owe under 50% on each of my two dormant cards - Do they add up the total of credit for your score, or is it an individual score for each card? Phew I hope that makes sense!

[Creditaddict]

how are they dormant with a balance on them?

[Anonymous]

Chloebeetle -

I also don't quite understand "dormant" if they have a balance.

However, yes all balances are totaled and then divided against your total Credit Limits to arrive at your percentage of utilization.  However, even if your "overall" utilization is 30%, but you have certain cards at 50% or more, these will ding your score.

The balance/use things that affect your score are :  percentage of utilization (amount debt in relation to credit limits), number of accounts with a balance, total dollar amount of debt.

Other things that affect your credit in this area is your payments.  Not just if they are paid on time, but if you pay minimums only.  Paying minimums only potentially flags that you are maxed out (income wise) and cannot handle more debt/credit.

So, 30% is not too terrible, but not good, especially when it represents around $10,000 in revolving debt.  As the dollar amount increases, it can begin to outweight, as a factor, more so than percentage of utilization.

[Anonymous]

Thank you so much - Dormant was the wrong word, obviously, I meant I never use the cards - I also realized I have 40,000 worth of credit and owe about 12,000.  I have a long term plan to pay them off and always pay more then the minimum - Expenses when I bought my house  - it appeared to be worth the low interst rates. - I am looking to refi so was just curious about the percentage thing - So we shall see - I originally had about 20,000 of debt so am doing well. My FICO when I bought the house was 740.  Thanks again.

[haulingthescoreup]

Just as an FYI, a member once posted that a Bank of America rep told him/ her that if you pay 4X the minimum or more each month, they will leave you alone in terms of AA (adverse action.) And that was before the credit crunch.

Just one bank, of course, but I think it's an interesting insight into how banks view long-term repayment of CC debt. They like to see a lot of money rolling back in on a regular basis, despite what the "minimum payment" might indicate.