Credit Utilization %

[Anonymous]

Question about Utilization. I understand we should keep it generally under 10% for reporting and PIF every month. However how does total revolving utilization compare to per account utilization for FICO?

Example 1 : 4 cards, each has a limit of $10,000 , $250 reports on each.

-vs-

Example 2: 4 cards, each has a limit of $10,000 , one reports at $1,000 and the rest have > 1% .

Does one work more effectively at rebuilding credit then the other?

[Anonymous]

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@Anonymous wrote:

Question about Utilization. I understand we should keep it generally under 10% for reporting and PIF every month. However how does total revolving utilization compare to per account utilization for FICO?

Example 1 : 4 cards, each has a limit of $10,000 , $250 reports on each.

-vs-

Example 2: 4 cards, each has a limit of $10,000 , one reports at $1,000 and the rest have > 1% .

Does one work more effectively at rebuilding credit then the other?

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You are losing points if you let more than one card report a balance. Have one at 9% or less and the rest report at zero. You can use the others, just pay them off before they cut so they report zero. 

[Anonymous]

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@Anonymous wrote:

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You are losing points if you let more than one card report a balance. Have one at 9% or less and the rest report at zero. You can use the others, just pay them off before they cut so they report zero. 

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    Really>? I mean I understand that carrying any balance at all wouldnt be ideal if it could be PIF *prior* to the statement being cut. I guess I just worded the question poorly.

In order to increase credit lines I need to show use , on time payments and justification for extension of larger credit limits. What would most effectively do that? < 9% utilization across all cards and make sure they are paid well in advance of the statement date?

[CH-7-Mission-Accomplished]

The statement balance reporting should be on one card (or two if you have lots) and should be between 1% and 10% of your total revolving credit limits.  

When asked about this concept, John Ulzheimer, the noted FICO expert, replied that "FICO isn't stupid" regarding spreading card balances out over multiple cards versus having it on one card.

There is an urban myth that an individual card should not report more than 30% of its limit, but this is just a myth.  An individual card will not get dinged unless it is reporting over 89% of its credit limit.

Some people also think that they need to have one card report and that that card should be between 1% and 10% of that one card's limit.  This is incorrect.  It is 1% to 10% of your total revolving limits.

1% is better than 2% which is better than 5% which is better than 9%.  I think people should try to keep the total revolving reported amount at 1% to 5% of total revolving limits.

[Anonymous]

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@CH-7-Mission-Accomplished wrote:

  I think people should try to keep the total revolving reported amount at 1% to 5% of total revolving limits.

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Great infor thank you for that. It makes perfect sense for overall credit health , staying well within your means. But, for those looking to build credit worthiness to increase credit lines , I imagine somewhat temporarily .... to show moderate use of credit but with full monthly payment in the hopes of takign $1500 limit cards to > $5K cards.

[CH-7-Mission-Accomplished]

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@Anonymous wrote:

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@CH-7-Mission-Accomplished wrote:

  I think people should try to keep the total revolving reported amount at 1% to 5% of total revolving limits.

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Great infor thank you for that. It makes perfect sense for overall credit health , staying well within your means. But, for those looking to build credit worthiness to increase credit lines , I imagine somewhat temporarily .... to show moderate use of credit but with full monthly payment in the hopes of takign $1500 limit cards to > $5K cards.

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Yes, you are correct if you have unsecured cards and you are trying to entice the lender to raise your credit limits.

Basically you do want to use the heck out of that card.  If you have low limits, like $500, it is necessary to make several payments a month to not exceed your credit limit.

If you have say a $5000 limit and you want to put through $3000/month on the accunt, you could choose to pay most of it before the statement cuts so your FICO will score high that month, or you can just pay it after the statement cuts, knowing that for that month your score will take a hit.  Just be sure to have the reported balance in the 1% range before you want to apply for more credit.

When you are rebuilding you are usually tracking your scores very closely so most people do pay all but a few dollars prior to the statement cut.  It's only nature to want to see the highest score you can.

[Anonymous]

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@CH-7-Mission-Accomplished wrote:

The statement balance reporting should be on one card (or two if you have lots) and should be between 1% and 10% of your total revolving credit limits. ..

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The next question (mine, at least) is does that utilization affect you in the future?

Say, this month I'm at 50% of my limit. Next month, if I'm at 1%, will I have a FICO ding from my historic balances? Or is the balance scoring portion simply a snapshot of that particular moment with no regard for past data?

[CH-7-Mission-Accomplished]

It's a snapshot.  You could be maxed out on all your cards and get hammered on your score.  Then you win the Lotto, pay them all off (except one!) and your scores would soar.  Utilization has no memory.

That said, it does sometimes seem like FICO is quicker to take points away than it is to give them back.  They come back but sometimes it takes a month or two.  I'm not sure why this seems to be the case.

[Anonymous]

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@CH-7-Mission-Accomplished wrote:

That said, it does sometimes seem like FICO is quicker to take points away than it is to give them back.  They come back but sometimes it takes a month or two.  I'm not sure why this seems to be the case.

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  Possibly to outsmart people from trying to balance transfer between reporting periods to make it *appear* they paid off cards? You know, balance transfer so that statements cut and report 0 balance before the new card carrying the weight reports that balance in.

[Anonymous]

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@Anonymous wrote:

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@CH-7-Mission-Accomplished wrote:

That said, it does sometimes seem like FICO is quicker to take points away than it is to give them back.  They come back but sometimes it takes a month or two.  I'm not sure why this seems to be the case.

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  Possibly to outsmart people from trying to balance transfer between reporting periods to make it *appear* they paid off cards? You know, balance transfer so that statements cut and report 0 balance before the new card carrying the weight reports that balance in.

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I would wager that it is more that other factors start to kick in as a higher percentage of your score. For example my util was around 80-90%, always PIF just low CL, I did the util game and my scores went from 680's to 780's. Over the next couple months they crept up a point or two but nothing major, I think that was more due to AAoA going up a couple months whereas before my Util was keeping me low so the AAoA had little to no impact (I sat at the 680 level for a year + before I worked Util). Once Util was not a major factor the other things kicked in more to affect my score. Of course without the scoring algorithm it is all guesses.