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Maintaining low utilization rate with avoiding interest

teamXDR
New Contributor

Maintaining low utilization rate with avoiding interest

Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

 

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.

 

This leads me to my question... I have a bill that is charged, a statement date, a due date and an utilization rate. When do I setup the automatic payment to the card? Before the statement date (I would think doing this would result in a 0% utilization rate). On/before the due date (this should have the utilization rate updated, but will there be residual interest?)

 

On a side note, does anyone see any holes in my strategy? Should I also try to keep my total utilization rate over that 1% as well (some store cards will remain at 0%). Should I close those store cards that will rarely be used?




Starting Score: 690EQ - 704TU - 654EX (04/01/2021)
Score Change:___00______00______00
Current Score:_740EQ - 750TU - 695EX (05/25/2021)
_______________ Goal Score: 740+
__
Message 1 of 14
13 REPLIES 13
Horseshoez
Valued Contributor

Re: Maintaining low utilization rate with avoiding interest


@teamXDR wrote:

Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

 

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.

 

This leads me to my question... I have a bill that is charged, a statement date, a due date and an utilization rate. When do I setup the automatic payment to the card? Before the statement date (I would think doing this would result in a 0% utilization rate). On/before the due date (this should have the utilization rate updated, but will there be residual interest?)

 

On a side note, does anyone see any holes in my strategy? Should I also try to keep my total utilization rate over that 1% as well (some store cards will remain at 0%). Should I close those store cards that will rarely be used?


I think the general concensus is you are way overthinking it.  Allow a trivial balance to report on one or two cards and let the rest report zero; that will give you the best score bump.

I categorically refuse to do AZEO!

Message 2 of 14
Remedios
Moderator

Re: Maintaining low utilization rate with avoiding interest


@Horseshoez wrote:

@teamXDR wrote:

Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

 

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.

 

This leads me to my question... I have a bill that is charged, a statement date, a due date and an utilization rate. When do I setup the automatic payment to the card? Before the statement date (I would think doing this would result in a 0% utilization rate). On/before the due date (this should have the utilization rate updated, but will there be residual interest?)

 

On a side note, does anyone see any holes in my strategy? Should I also try to keep my total utilization rate over that 1% as well (some store cards will remain at 0%). Should I close those store cards that will rarely be used?


I think the general concensus is you are way overthinking it.  Allow a trivial balance to report on one or two cards and let the rest report zero; that will give you the best score bump.


That is not a general consensus.

OP is free to manage their cards however they see fit.

The fact it isn't for you (or me), doesn't mean it's not right for them. 

Message 3 of 14
simplynoir
Community Leader
Super Contributor

Re: Maintaining low utilization rate with avoiding interest


@teamXDR wrote:

Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

 

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.


Just to be clear here because the way I am interpreting what you are discussing is maybe different so just wanting to make sure. If you want to use the AZEO method for maximizing your scores it just needs to be ONE card that carries the utilization/balance, your other cards can be paid off as you normally would do

Message 4 of 14
teamXDR
New Contributor

Re: Maintaining low utilization rate with avoiding interest


@simplynoir wrote:

@teamXDR wrote:

Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

 

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.


Just to be clear here because the way I am interpreting what you are discussing is maybe different so just wanting to make sure. If you want to use the AZEO method for maximizing your scores it just needs to be ONE card that carries the utilization/balance, your other cards can be paid off as you normally would do



THIS I think answers my question... to maintain the best scoring for utilization, only 1 card needs to show usage, below 9%. I was under the impression it was "ALL" of the cards. Thanks for pointing me in the right direction.




Starting Score: 690EQ - 704TU - 654EX (04/01/2021)
Score Change:___00______00______00
Current Score:_740EQ - 750TU - 695EX (05/25/2021)
_______________ Goal Score: 740+
__
Message 5 of 14
Remedios
Moderator

Re: Maintaining low utilization rate with avoiding interest

@teamXDR  if you are trying to squeeze every last point, you need to pay your cards to $0.00 before the statement cuts, and like @simplynoir pointed out, leave a small balance on only one card.

 

If you pay them before the statement, biggest drawback is loss of float and time spent micromanaging.

Maybe try it for one month and see what kind of difference it makes for you.

 

Fico 8 isn't really that much sensitive to numbers of cards with balances, there are some points lost, but nothing like older scoring models, they love it. 

 

Give it a try and see if it's worth it for you. 

Message 6 of 14
simplynoir
Community Leader
Super Contributor

Re: Maintaining low utilization rate with avoiding interest

To ride off what @Remedios has said to me AZEO isn't really going to gain you much scoring wise at your current stats unless you're looking maximize your scores for getting a loan ike a mortgage or vehicle, or a future credit card application

 

I know some people when rebuilding they use AZEO to keep them honest since it has you keep on top of your finances. Promotes good habits essentially when using that method. I think if it helps you keep things organized then go for it but just need to keep in mind it isn't a bad thing if you let some cards report either

Message 7 of 14
SouthJamaica
Super Contributor

Re: Maintaining low utilization rate with avoiding interest


@teamXDR wrote:

Now that I have the majority of my credit cards paid off, overall 4% utilization rate, I want to try and plan out how to maximize my score. From my understanding, having a 0% utilization rate on a card is not the best for your score. Ideally it seems you want it between 1-9%. I have made my own spreadsheet that calculates those for each of my cards.

 

My plan is to assign a "bill" to each card to be paid each month, that will bring it to at least that 1% utilization. I will also assign an automatic payment to pay off that card that the bill was charged to.

 

This leads me to my question... I have a bill that is charged, a statement date, a due date and an utilization rate. When do I setup the automatic payment to the card? Before the statement date (I would think doing this would result in a 0% utilization rate). On/before the due date (this should have the utilization rate updated, but will there be residual interest?)

 

On a side note, does anyone see any holes in my strategy? Should I also try to keep my total utilization rate over that 1% as well (some store cards will remain at 0%). Should I close those store cards that will rarely be used?


If you want your revolving utilization to be super-optimized to the point that you will have no negative effect in any scoring model, the optimum formula is to have

-one bank card report a sub-$100 balance each month before paying it off and

-all other accounts report a zero balance.

This is the AZEO (all zero except one) method.


Total revolving limits 677500 (584500 reporting) FICO 8: EQ 745 TU 750 EX 738

Message 8 of 14
mgood
Frequent Contributor

Re: Maintaining low utilization rate with avoiding interest


@teamXDR wrote:

 

Should I close those store cards that will rarely be used?

DO NOT close an account that isn't costing you anything. If there are annual fees or something, then it may be something you want to get rid of. Otherwise, use it a few times per year and pay it off before it charges you any interest, and leave it alone. They contribute to your average age of accounts and to your aggregate credit limit, both of which improve your scores.

 

An exception might be if you have so many old accounts and such a high aggregate credit limit that those cards are irrelevant and you're just trying to cull the herd to make life more simple.


GOAL:

Starting Score: EQ8 680, TU8 713, EX8 701
Current Score: EQ8 776, TU8 787, EX8 768
Goal Score: EQ8 780, TU8 780, EX8 780


Take the myFICO Fitness Challenge
Message 9 of 14
teamXDR
New Contributor

Re: Maintaining low utilization rate with avoiding interest

Got it.. I've PIF 2 of the cards that have an annual fee, high interest rate and low limits. Called and closed those accounts. So far I've paid off all of my accounts with the exception of 3, which are ~14%-30% utilization rate, and my next targets. I expect a huge score bump over the next month as my overall utilization rate has dropped from ~40% to 4%.

 

My plan is to get all cards PIF, then use the one with the highest limit as my "gas" card or such to keep the monthly balance below 9%.




Starting Score: 690EQ - 704TU - 654EX (04/01/2021)
Score Change:___00______00______00
Current Score:_740EQ - 750TU - 695EX (05/25/2021)
_______________ Goal Score: 740+
__
Message 10 of 14
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