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From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION

Regular Contributor

From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION


How To Improve Your Credit Utilization
Oct 1, 2015 | John S Kiernan

How To Improve Credit Utilization

Credit utilization, the percentage of your available credit that you use each month, is a critical component of your credit score which ultimately serves as an indicator of financial restraint and, thus, your ability to handle additional spending power. More simply, most creditors prefer customers who use only a portion of their allotted credit lines because it reflects reasonable spending habits, and such individuals are statistically the most likely to pay their bills on time in the future.

The rest of the article can be found here:  https://wallethub.com/edu/how-to-improve-credit-utilization/17190/


Just got rid of Capital One QS1 card out of my wallet on Christmas.. woohoo!!!

Hopefully due for CLI from Capital One QS in June.
And all my other cards should increase by that time (I'm hoping) along with the paying down some balances... My CS should be bouncing up to 700, I hope, by June 2018.
Citi Diamond limit 7300 (received May 2016)
Lowe's limit 12000 (received Feb 2015)
Chase 3000(received June 2017)
Bank of America 4500(received July 2017)
Simmons First 8000(received Sept 2017)
Capital One Quicksilver 2750(received orginal QS1 in Aug 2014 and Platinum in June 2017, converted Dec 2017)

Citi Double Cash 1000 (AU)
Capital one Platinum 600 (AU)

As of 12/17 BofA says FICO TU 689....
Capital One credit wise VS TU 12/19/17 says 631
Chase VS TU 631 as of 12/19/17, as of January 643
Citi Equifax 648 as 11/21/17, as of December 662
Lowe's TU 684 as of 12/07/17, January 689
Experian 703 as of 12/13/17
Credit Karma TU VS 631 as of 12/18/17
Credit Karma Equifax VS 629 as of 12/18/17
Discover free credit scorecard Experian 706 as of 12/17/17...... Transunion shows I have 2 inquiries.
Equifax 6
Experian 4


I have Citi going to be falling off May 2018
Chase, Capital One, and BofA falling off June 2019
Simmons falls off Sept 2019
And I applied for loan for HVAC system which I did not take advantage of... Falling off in 2019
JANUARY 13 CREDIT CHECK TOTAL ... EXPERIAN 684...TRANSUNION 690... EQUIFAX 669

In NOVEMBER EXPERIAN 687, TRANSUNION 685, EQUIFAX 652



No collections or charge offs leins of any kind.... I only have a 120d late from October/November 2011........

I have 1 mortgage at est. about 68k.
I have 1 car note est. about 12k.

More info to come asap.....



I hope to get on the penfed train by late next year. And woul not mind getting a Discover card and maybe American Express... Not sure just thinking I'd like to have Disc and AE in my wallet.... For sure want Penfed!!
Plan to be In the garden till December 2019.


I will try later to figure out how to get my spreadsheet uploaded as a pic on here so this is no so jumbled.....
Message 1 of 13
12 REPLIES
Super Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION

All of that fluff above is great and all, but there are really only 2 things one has to lower/keep utilization low.  The first is for people that have high utilization currently and the second for those that don't have that problem:

 

1 - Pay off your debt.  There's no magic forumula here.  Pay down/off your debt and your utilization improves.  Once you're there, refer to "2" below.

 

2 - Never buy anything with a credit card that you wouldn't/couldn't pay for in cash today.  Always PIF your CC balances and/or treat it like you would a debit card.  Following the philosophy of "2" here will avoid you from arriving at "1."

Message 2 of 13
Valued Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION


@BrutalBodyShots wrote:

All of that fluff above is great and all, but there are really only 2 things one has to lower/keep utilization low.  The first is for people that have high utilization currently and the second for those that don't have that problem:

 

1 - Pay off your debt.  There's no magic forumula here.  Pay down/off your debt and your utilization improves.  Once you're there, refer to "2" below.

 

2 - Never buy anything with a credit card that you wouldn't/couldn't pay for in cash today.  Always PIF your CC balances and/or treat it like you would a debit card.  Following the philosophy of "2" here will avoid you from arriving at "1."


+ 1000 I feel that really needs to be emphasized...studies show that people tend to spend more on a credit card than they would if paying in cash!!! If you can not remain disciplined enough to resist it causing un-needed spending, then you would be better off without any credit cards. Never ever allow plastic cards to cause you to live beyond your means...IMHO, it just is not worth it. You should control your credit cards rather than let your cards control you...end of sermon!!!!



TU fico08=831 05/31/18
EX fico08=800 06/18/18
EQ fico08=826 04/18/18
EX fico09=823 06/02/18
EQ fico bankcard08=856 05/22/18
Message 3 of 13
Super Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION

Very solid feedback from Sarge above!

Message 4 of 13
Moderator

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION

Hi @Tryin2betterscore2, your post has been edited to conform to our guidelines here.

 

Please see the following for more details:  https://ficoforums.myfico.com/t5/Credit-in-the-News/Citing-articles-please-read-before-posting/m-p/5...

Message 5 of 13
Community Leader
Super Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION

The WalletHub piece is fairly decent, but there's at least a couple things in it worth correcting.  I include them below with my comments in blue.

 

30% Is The Golden Rule, But Too Low Isn’t Optimal: It’s generally recommended that consumers keep credit utilization below 30%, which is good advice that can also be a bit misleading.

 

I was hoping the author would go on to clarify two particular ways that it is misleading, but he doesn't mention either:

     (1)  The optimal threshold is not under 30% but actually under 8.99%.  Going from 28% to 8% will give you a significant boost.

     (2)  If the best somebody can achieve is in the vicinity of 30% (due to limited funds) then he needs to make sure he gets under 28.9%.  A utilization of 29.1% will be rounded up to 30% which will be penalized noticably more sharply then if it was at 28.7%.

   

While maintaining zero utilization is certainly better than maxing out your credit cards, swearing off credit entirely doesn’t necessarily engender confidence among potential lenders because question marks will still remain regarding how you might ultimately leverage the credit made available to you, should the circumstances ever demand it.

 

It's not simply that an individual lender might have an issue with it, but all cards at zero has a FICO scoring penalty as well.

 

The best approach is to make sure you are using at least one card each month and paying off the balance in full when the statement comes.

 

This is very misleading, in that it gives the reader the impression that paying in full is a way of controlling utilization.  It is not.  To PIF, while laudable in that prevents paying interest, has nothing to do with reported utilization.  A person could PIF after the statement prints every month and have a utilization at 70% or even higher.  The writer needs to help his reader understand how balances are reported to the bureaus and then how to control how much these amounts are, typically by controlling the balance (i.e. paying it down) before the statement comes.


Everything Is Relative: Not everyone is evaluated according to the same utilization scale. What matters most is how your utilization compares with that of other individuals who are approximately your age and have similar financial profiles in terms of factors such as income and debt obligations.

 

This is untrue.  FICO does not take into account the consumer's age, and I am pretty sure it is illegal for individual lenders to do that either (happy to be corrected if I am mistaken on that point).  Income is also not taken into account by FICO -- and as far as I know reported utilization is not considered differently based on a person's income, even by individual lenders.  Here it is possible that the writer is thinking of DTI, but that is very different from revolving utilization.

Message 6 of 13
Super Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION

Nice work finding the holes in that article, CGID.
Message 7 of 13
Valued Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION


@Tryin2betterscore2 wrote:


How To Improve Your Credit Utilization
Oct 1, 2015 | John S Kiernan

How To Improve Credit Utilization

Credit utilization, the percentage of your available credit that you use each month, is a critical component of your credit score which ultimately serves as an indicator of financial restraint and, thus, your ability to handle additional spending power. More simply, most creditors prefer customers who use only a portion of their allotted credit lines because it reflects reasonable spending habits, and such individuals are statistically the most likely to pay their bills on time in the future.

The rest of the article can be found here:  https://wallethub.com/edu/how-to-improve-credit-utilization/17190/


If utilization was a reflection of spending habits it would have to use prior utilization...which it does not. Utilization is a point in time metric and only considers what your utilization is at the time of the pull. If your score takes a hit for having a very high utilization one month, you can regain every point you lost if your utilization is low the next month. In fact, you could have a 70% utilization every month before the pull and then pay it all off except for <8.9% on one card, and your score will be the same as if it was always that low. In order for something to indicate a spending habit, previous history would need to be considered.



TU fico08=831 05/31/18
EX fico08=800 06/18/18
EQ fico08=826 04/18/18
EX fico09=823 06/02/18
EQ fico bankcard08=856 05/22/18
Message 8 of 13
Established Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION


@BrutalBodyShots wrote:

All of that fluff above is great and all, but there are really only 2 things one has to lower/keep utilization low.  The first is for people that have high utilization currently and the second for those that don't have that problem:

 

1 - Pay off your debt.  There's no magic forumula here.  Pay down/off your debt and your utilization improves.  Once you're there, refer to "2" below.

 

2 - Never buy anything with a credit card that you wouldn't/couldn't pay for in cash today.  Always PIF your CC balances and/or treat it like you would a debit card.  Following the philosophy of "2" here will avoid you from arriving at "1."


I generally agree but will add one notable exception: you have a long 0% APR period (let's say >12 months), and have a huge purchase (>10K) coming up.

 

I think in that scenario, even if you could pay off the >10K immediately, it would be better money-wise to just keep that sum in a high yield savings account/investment account, and treat the CC balance essentially as an interest-free loan.




Message 9 of 13
Regular Contributor

Re: From Wallethub, HOW TO IMPROVE CREDIT UTILIZATION


@sarge12 wrote:

+ 1000 I feel that really needs to be emphasized...studies show that people tend to spend more on a credit card than they would if paying in cash!!! If you can not remain disciplined enough to resist it causing un-needed spending, then you would be better off without any credit cards. Never ever allow plastic cards to cause you to live beyond your means...IMHO, it just is not worth it. You should control your credit cards rather than let your cards control you...end of sermon!!!

My new $30K, $700 per month installment loan totally agrees with this point!  Lesson learned!

Message 10 of 13