Here's the simplist way to look at it. All your credit cards are included in "Revolving Utilization" category. The category counts as 35% overall of your credit score.
An "open" account counts towards your revolving utilization of credit.
An "closed" account doesn't count against your revolving utilization. Unless you still owe a balance. They do their formula with only the balance owed and not the credit limit of that credit card.
Approach the whole thing by thinking of Utilization (what you spend on your credit cards)
The formula is calculated by looking at all your "open" accounts, find out the credit limit dollar amount and what you currently "utilized or spent" for each credit card. Add each open account's credit limits together to get the total called total credit limits. Then add up all money you've spent on each credit card called total balances owed. DO NOT include car loans, house mortgages or personal loans. those are considered installments, they do not apply to credit utilization. Now divide the total balances owed by total credit limits, you get a decimal. Multiply that decimal by 100. That gives you the percentage of revolving utilization. If you owe money still on a "closed" account include the owed money to the addition of the total balance owed. Do the formula again.
Total balances owed divided by Total credit limits, multiply by 100.
Credit karma and Wallethub I advise setting up notifications on to send to your email but only use them as indicators of changes. Overall their scoring system is 20-30 points higher than your FICO score. Home lenders and dealerships use your Fico score predominantly.
FICO uses different FICO scores.
Fico 8 is used for loans for automobiles.
Fico 5, 4 and 2 together are used for home mortgages. Home lenders base their decision on the median or "middle" score of those. Pulling a Fico report once a month has saved us a ton of credit inquiries (hard pulls). One hard pull from one lender results in 3 hard inquires. I found out the hard way. Talked to 10 lenders and my report showed 30 hard pulls on Fico. anything over 10 inquiries is considered "excessive" and dings your credit pretty hard. If you do 10 inquiries in one week those can be removed, sometimes credit agencies miss it, you must dispute. Anything I've disputed I've gained 9 points on average.
other stuff.
If you have credit cards don't close them, they affect your length of credit history, as well as good payment history.
If you have Charged off credit cards, look at Your credit report, if they are "open" they count towards your revolving utilization. You utilized the credit card by spending money. If you "settle" by paying an amount less than the full balance owed, they close the account and that account clears off from effecting revolving utilization.
Ultimately the best thing to do to get your credit score to its highest point is to pay the balance in full because not only does it stop effecting revolving utilization but it also clears your report of "missed payments" on that credit card account as your in "charged off" status. Missed payments count even more toward your credit score.
Of the 14 or so Mortgage lenders we talked to, none of them understood the rules of charge off. They could not tell us if the charged off credit cards affected our credit as stupid as that seems. You can ultimately decide to not pay a charged off credit card because of the 7 year statute of limitations and the debt gets removed, any contact you make with that credit agency starts over that 7 year period. however what you must think of is this, those charge offs most likely include late and missed payments which will ding you that entire 7 years. They do not go away immediately when your account is closed by the bank that gives you the credit card. If your bank tells you you can't use your credit card anymore by them locking it and calling it charged off, they will say over the phone if you ask that it's "closed". It's not closed, it's will be deemed still as "open" on your credit report thus effecting your "Revolving Utilization" category.
The best way to increase your revolving utilization of credit is to spent 20% of the total credit limit. If you only have 1 credit card and it's limit is $1000. Don't spend anymore than 20% of that $1000 limit. If you have two or more credit cards the pertage is based on the total credit limits of all cards. $1000 limit and $2000 limit. this Is $3000 in limits multiplied by 20%. So that's $600. Split in 2. Spend $ 300 on one card and $300 on other card. Pay them once your credit card statement shows a minimum amount due. Don't pay the next day, wait for the statement. Then pay the minimum. Don't pay the full balance as the next creditreport would show your balance of $0 and the utilization or spending of credit stops. If your not using/utilizing/spending your not showing the credit agencies you can use credit or make payments. No activity means no credit increase. Always utilize 20% but no more each month. One tip I was given was to pay any utility off with my credit card until I got up to that 20%. Then pay using other credit cards. Remember, it's 20% utilization of all credit cards combined.
if you have a high interest rate I would suggest only spending 10% of the limit. Leaving your balance at $0 is bad and spending over 20% is bad. Never max out a credit card.
