Utilization?

[Jmc70]

I'm fairly new to the board here,...just have a few questions.

I have had no late payments on any accounts in 3-4 years, however, my score is killing me.  Right now it's listed as 623, and, I have three open CC's.

Limits on these cards are 1000, 800, and 750.  Right now, all balances are hovering right around the CL.

I am now in the position where I am able to payoff all of these cards in full- or at least bring them all down to 40% util.

What effect would this have on my score?  Would I go up,...a lot, a little?  I've had my mortgage for almost a year (4.875%, and took a hit when it posted to my CR's).

Any advice would be appreciated....

Thanks!

[haulingthescoreup]

Your scores should go up, a lot, as soon as each card reports the new balance.

Pay off two completely before their next statements. Let $10 report on the third, and then pay it off.

Revolving util is a huge driver of FICO scores.

When you look at your FICO score reports, what's on screen 2 on the left, the negative factors? If high util is #1 or #2, paying off the cards should have a real impact.

And after you do so, keep the reported util down. Use the cards all you want, as long as you can pay them off immediately. And with such low limits, I would definitely pay them off before they report.

[hunter399]

its amazing how much util alters your scores. Paying them down/off will help a lot. How much? Only time will tell. 

I'm fairly new as well, and trying to figure out the difference between paying off in full or leaving $10 or so on the card at statement time. 

[RobertEG]

The effect of paying down utilization depends a lot on your scoring category, or what is commonly referred to as your scoring "bracket."  While affects of utilization are generally advertised as being 30% of your FICO score, and payment history as 35% of your score, they are just an overall average.  It varies

FICO is not just one scoring algorthm.  It is a group of about a dozen or so different algorithms.  Before FICO does any specific scoring, it first places you into one of the dozen of so algorithms that best fits your credit history.  Just as payment history, generally at around 35% of your overall FICO scoring, is the most significant in overall weithting, it is also the most significant in determining which scoring buckett you will first be be scored under.  Credit files with remaining major derogs (90+ lates, COs, CAs, etc), or multiple derogs of any severity,  are considered "dirty credit files."  Thus, you are placed into a scoring bracket that puts more emphasis on this category, with resulting less emphasis on other categories, such as $ util, lenght of credit, etc.  As you move out of a "dirty" category, then looking at your % util may rise in significance as the next most significant category for bracket placement. 

Effffect of % util improvement depends a lot on your entire credit file, and thus cant be predicted for any one % util improvement.

[Anonymous]

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@hunter399 wrote:

its amazing how much util alters your scores. Paying them down/off will help a lot. How much? Only time will tell. 

I'm fairly new as well, and trying to figure out the difference between paying off in full or leaving $10 or so on the card at statement time. 

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Utility is truly a huge driver.

Most folks get the best impact from letting one card report a very small balance, and the remainder of the cards reporting a zero balance. 
Different CRA's respond a bit differently.  But you're generally in excellent shape on CC utilization if you follow that mantra.

[jonmyers]

Long time lurker here... But I just signed up for scorewatch and was playing with the simulator last night. I put in different numbers, and did find that below 30% was good, however I found that less than 10%, *but more than 1%* gave me the best increase. I don't know how accurate the score simulator is (I'm assuming that since it's through FICO it's better than bad), but it told me I had a better score if I left $30 posting rather than$10. That increase didn't change until I went over $300. FYI, My overall limit between my only two cards is 3k. My util currently is about 33%, and my score only moved about 10 points. jon

[RobertEG]

Fine-tweaking of % util is fun to play around with, but % util is the one FICO scoring category that has no historical memory.

Until you are actually in the new credit applic process, it is all kinda academic.

If you still have major derogs, or multiple derogs, in your CR, they would be my first focus. That keeps you in a "dirty scoring bucket", does not remove the impact of those derogs, and reduces the beneficial impacts of % util improvements.

Fine-tweaking of % util is reserved, in my opinion, to the two or three months before a new credit application is submitted, and other more major prior efforts have been taken.  It is not a major monthly goal of pre-app credit score rebuilding.