Utilization % for Dummies

Anonymous · ‎05-11-2015

4 CC:

CapOne Plat: $500 limit

2 Quicksilver: $500 limit on both

Amazon Store card: $800 limit

In an attempt to raise scores, what should the balances be on these cards between the due date and those few days after that the balances are reported to the credit bureaus? June will be my first month having more than one card.

CH-7-Mission-Accomplished · ‎05-11-2015

You have $1800 in credit. 1% is $18.

I would try to let between 1% and 3% report so $18 - $54. And this should report on only one card. I would use one of the Visa/MC cards and not Amazon.

So try it for a few months letting $20, $30, $40 and $50 report (on just one card) and see what your FICO scores look like.

Anonymous · ‎05-11-2015

@CH-7-Mission-Accomplished wrote:
You have $1800 in credit. 1% is $18.

I would try to let between 1% and 3% report so $18 - $54. And this should report on only one card. I would use one of the Visa/MC cards and not Amazon.

So try it for a few months letting $20, $30, $40 and $50 report (on just one card) and see what your FICO scores look like.

So pay all but one to $0? I can't see the Amazon card getting much usage as I mainly got it to get $40 off a car seat,lol.

CH-7-Mission-Accomplished · ‎05-11-2015

Yes, all cards kept at zero when the balance cuts except one card showing a small amount owing. Then pay that small amount by the due date to avoid interest.

Since all your Cap 1 cards are at $500 limits, it doesn't matter which card reports the balance. Some people like to have the same card reporting each month so they can keep track of it, and other people move it around so a different card reports each month. I'm not sure if it really matters.

If at some point you get one of those Cap 1 cards to increase you limit (or all of them) you might want to have the card reporting a small balance be the card with the highest limit.

takeshi74 · ‎05-12-2015

@Anonymous wrote:
In an attempt to raise scores, what should the balances be on these cards between the due date and those few days after that the balances are reported to the credit bureaus? June will be my first month having more than one card.

Instead of focusing on the specific balance you can easily do the math. Otherwise when your limits change you'll have no idea what the target balance should be. Utilization is simply:

balance(s) / limits(s) = %

If your target is X% utilization then just multiply limit(s) by X and you have the target balance. An example was provided above but to break it down a bit more, if you want 1% of $1,800 to report:

$1,800.00 x 0.01 = $18.00

Anonymous · ‎05-12-2015

Utilization has no memory so there is a difference in what you should do to raise scores short term vs long term.

Short term, you can temporarily raise your score by optimizing utilization for a couple of months. You should do this when you are planning a credit application, particularly a mortgage or auto loan. Have one card report about 10% of its limit and the others all report zero. So with your current limits key $50 report on one, zero on the others.

But that is short term. Long term you score will benefit most by getting those limits raised, and for that you want to show that you have increased capacity to pay down debt, something that doesn't show in your score but which lenders calculate.

If you are NOT imminently applying for a loan AND you are able to do it, work on raising the limits. To do that, run your cards near their limits every month and PAY IN FULL, NEVER CARRYING ANY BALANCE AT ALL.

Over time that will convince the lenders that you have the capacity to make $400 or $500 payments on a monthly basis and they will respond eventually by raising your limits accordingly. Some will automatically raise your limits, some you will have to request.

Try for a limit increase after every six consecutive statements in which you pay the balance in full (I.e., after the fifth consecutive payment posts to your credit report on the sixth statement).

Getting your limits raised will help your score in s more permanent way by making it easier for you to have low utilization. It is easier to post 5% utilization when you have a $5000 limit.

There may also be a credit bump for having a card with a limit over $5000 though it is unclear so that should be a goal over the next couple years. You should be able to double your limit every six months with solid payment in full history.

Anonymous · ‎05-13-2015

@CH-7-Mission-Accomplished wrote:
You have $1800 in credit. 1% is $18.

I would try to let between 1% and 3% report so $18 - $54. And this should report on only one card. I would use one of the Visa/MC cards and not Amazon.

So try it for a few months letting $20, $30, $40 and $50 report (on just one card) and see what your FICO scores look like.

I believe I am going to give your theory a try this month.

I opened a Cap1 secured card in December with a $300 CL and have kept its UTI % at 8-9%. Last month, I added both a QS1 and a Walmart card ($500 CL each) and the 15th of this month will be the first reporting for all 3. I have a $0 balance on the secured and Walmart and a $48 balance on the QS1.

I'd planned to pay that down to 7-8% but I think I'll use your advice as a fun experiment. I always hear that FICO has no memory when it comes to UTI%, so what's the worst that could happen, right?