utilization vs balance...

[Anonymous]

i have 2 cc....one with best buy (hsbc bank) and one with wells fargo...

i also have 2 bank accounts, one with wachovia and one with a credit union...

my best buy card has a balance of 430 with a credit limit of 2600.....16.5 % utilization

my wells fargo card has 160 balance on a 5000 credit limit (new card lol)....3.2% utilization

total utilization 590 balance of 7600....7.7%

should i pay off my best buy card and shred the plastic or should i stretch out the payments to gain positive history/credit limits?  i know that closing accounts have negative impact but, hypothetically, what would i expect if i closed my best buy card in terms of my FICO?  in terms of my credit limit with wells fargo?  in terms of my future APR with wells fargo?

o0o  i was also considering depleting my checking and savings with wachovia (soon to be wells fargo) and keeping money alll into my credit union.  ive done my research and credit unions seem to be the wave of the future lol....i am a member of a CU in philadelphia and i want to establish a relationship with them.  i dont like the idea of using 2 banks....and each bank has one checking and one savings.  if i closed my checking and savings account at wachovia and kept all my money in my CU would wells fargo catch wind of that like "heyyyyy wtf are you doing?!?"  and effect my credit line with them.  i knowww that credit department and consumer banking are probably two different departments but after the purchase of wachovia everything will be under wells fargo's roof???  am i too concerned??? would closing my wachovia checking/savings account impact my credit card with wells fargo??

[haulingthescoreup]

You'll get no benefits from drawing out payments.

But you won't benefit from closing the card, either.

I'd pay off the BB, let the WF report, and then pay it off before the due date. Then each month, let a small amount report on the WF and then promptly pay it off. Pull out the BB every few months and buy a pack of gum at the register or some blank CD's.

You need to keep clean history reporting, but that does not mean carrying balances. You don't need to pay a penny of interest to build good history.

No firm knowledge of whether closing your WF bank accounts would affect your CC. My guess is that it wouldn't. They're way too busy with other stuff. But you never know, I suppose. I have plenty of CC's with lenders that I don't bank with, but I've never closed a bank account with one, so no personal experience with this, I'm afraid. But I honestly doubt that they track this sort of thing. There's so much movement in and out of banks that it would take an entire department to track this sort of thing.

[Anonymous]

good info...so you suggest i pay off the balance but keep the card and break it out every couple months just to show activity?  im not in the market for a major purchase (house or car) in the near future....but i dont want to effect my credit where digging out of it will be a pain in the ass....

im under the assumption technically as long as you pay the minimun before the due date you are in "good" standing....i notice people here often pay more then the minimum for obvious reasons....but some people are so calculated that the make sure the payment is in the cc companys hands befoore the next statement is cut?  or before the cc company report??  whats the advantage of this??

[Anonymous]

I would not be in a hurry to close the WF accounts.   Maybe put enough money in the pay the CC bill each month.  Wait until your CU gives you a better CC before you decide.  I like having both CU and Major bank accounts.

Why close the BB?  2 CC is prettly slim for best FICO score.

[ngerasimatos]

What are you trying to achieve? Knowing your ultimate goal will help with advice. 

[Anonymous]

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@Anonymous wrote:

good info...so you suggest i pay off the balance but keep the card and break it out every couple months just to show activity?  im not in the market for a major purchase (house or car) in the near future....but i dont want to effect my credit where digging out of it will be a pain in the ass....

im under the assumption technically as long as you pay the minimun before the due date you are in "good" standing....i notice people here often pay more then the minimum for obvious reasons....but some people are so calculated that the make sure the payment is in the cc companys hands befoore the next statement is cut?  or before the cc company report??  whats the advantage of this??

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Your are in good standing as long as you pay the minimum by the due date.  Paying in full, to avoid interest.

If you pay before the statement cuts, you can control the utilization that is reported, in order to maximize your FICO score.   This is very useful when you are applying for credit.    Utilization It has no permanent effect on your credit history.

[haulingthescoreup]

One of the biggest drivers of your FICO scores is your "revolving util" (utilization), measured as the total of your CC balances reporting divided by the total of your CC CL's.

Most (not all, but definitely most) CC's report the balance on your statement to the credit bureaus. That's the figure used in the numerator of the util calc.

People who aren't aware of this and who use their CC's a lot (generating rewards, managing cash flow, consumer protection, etc.) tend to have high balances on their statements. Even though they immediately turn around and pay them off, so that they never carry balances and of course are never late, their scores are damaged by making it look like they're using way too much of their credit.

If you pay off your balances (online is easiest) several days before the statement posts, you'll have $0 report instead of however much you charged that month. Your revolving util will thus be lower, and your scores will be higher. There's no real downside, other than the minor nuisance, because these days you sure aren't losing any appreciable interest by paying a week or two earlier than normal.

Many have pointed out that this isn't necessary if you're not in the market for credit, which is true. But if something comes up where you do want to optimize your scores and reports, it takes a month or more for each card to go through its billing cycle and update to $0. So many of us just routinely pay them early.

I usually have 1 card reporting a balance. Over the last 4-5 weeks, I had four (out of nine) with balances, and I lost 15 points or so on both TU and EQ. So in another week or so, I'll be back down to 1. My scores are already starting to come back up as the previous offenders return to $0 reported balance.

Since you're one of our more restrained users of credit here, lol, you might want to look at the stickied thread on "Understanding FICO Scoring" about the characteristics of FICO High Achievers. We've collected and posted the comments that we've gotten on our FICO score reports to try to paint a picture. One common element is that many high achievers only have 3 or 4 cards, but they do have them. It can be tough controlling scores with only one or two cards. Since revolving credit is the riskiest kind, it is rewarded more for good behavior on scores. It shows that you have credit, you're not afraid to use it, and you use it responsibly.

[Anonymous]

im not trying to achieve anything specific....im just not trying to hurt myself as a result of actions i can control.  im not in the market for a substantial amount of credit at this moment and i do not forsee anything major in the near future....

[haulingthescoreup]

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@Anonymous wrote:

im not trying to achieve anything specific....im just not trying to hurt myself as a result of actions i can control.  im not in the market for a substantial amount of credit at this moment and i do not forsee anything major in the near future....

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In that case, there's nothing wrong with just continuing to do as you have, as long as you realize that you will probably see score fluctuations according to how many of your two cards post balances, and how big the balances are. If you do see a reason to apply for credit in the future, give yourself a good two months to play the scoring game by the early paydown, so that the balances will have time to post and your scores to change.

For any other readers, the effect of two cards posting balances aren't as dramatic with additional cards. OP is affected because he has just two cards, which is perfectly fine and sensible, of course. It's just that the scoring math hits harder in his case.

Sorry, that could well be "her" case! (I know I sometimes get a bit exasperated when everyone assumes that I'm a man.)