Which of these builds your CS faster?

[Desmoire]

Ever since I recently joined this forum I have become increasingly interested in how CS works. I have learned that if you remain 9% or less total UTL and never obtain baddies you will affect your CS in a positive way. My biggest question is.. what if you want to make a big purchase? What if you wanna show the creditors that you can rack up 60% UTL then quickly pay it off in a couple months? Yes your score will drop a bit at the beginning, but what if it bounces right back then increases slightly more than someone who just uses 9% then pays it down?

The biggest reason why my curiosity is getting the best of me is because of my brother. He had a baddie when he was 19, some random rent payment that he forgot about. 5 years later he has 15,000 CL amongst 2 cards and a LOC. He literally maxed out everything for a period of 5 months right after purchasing a house for reasons I need not mention. Needless to say, over a year he paid it all off and purchased a car. 2 years later has a 792 CS whilst racking up 60% UTL, paying it all off in months, and bouncing right back.

Maybe the creditors favor responsibility over all else in regards to large purchases? Maybe you obtain very high CS quicker by using this method? Or maybe its just the fact that he responsibily never recieved a baddie after that, obtained a car and house loan, and let his AAoA increase dramatically?

What do you guys think?

[user5387]

A credit score is based on a snapshot at an instant in time.  If your utilization was 89% last month, and 3% this month, it's the 3% that counts in computing the score.

So at least in theory, you can have high utilization, and then dramatically lower it at some point, and raise your scores while doing so.

A couple of problems with this approach are:  (1) interest, (2) possible AA from creditors, and (3) getting carried away and not being able to pay your debts.

[GFer]

It's not about how much utility he put one the cards or loc. It's about the fact that he paid his bills on time. The diversity of credit. The credit HISTORY. Showing creditors that one can manage credit (any and all credit!) responsibly is what winners do!

[RobertEG]

I believe the question is directed more towards creditor view of prior utils than current score effect.

Yes, FICO only scores based on current util.

However, more detailed credit reports also show prior levels of past util, even though not directly scored.

I would expect creditor views of prior levels of util would vary depending upon how long the consumer maintained those high levels.

Yes, current creditor could view  periods of relatively high util positively if they show a pattern of paying down within a reasonable time.  More potential interest.

However, the flip side of the coin is that if a consumer maintains high utils over an extended period, it may be an indication of living on credit, and potention future problems.

It is not uncommon for creditors to reduce credit limits when they seen high % utils over an extended period, particularly when the card is maxed out.

Thus, I would guess that seeing high levels over a short period might show creditors that you have the means to handle high utils, and recover.

It's more of a manual review issue than a scoring issue.......

[takeshi74]

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@Desmoire wrote:

My biggest question is.. what if you want to make a big purchase? What if you wanna show the creditors that you can rack up 60% UTL then quickly pay it off in a couple months? Yes your score will drop a bit at the beginning, but what if it bounces right back then increases slightly more than someone who just uses 9% then pays it down?

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No "what if" to the rebound with utilization.  As stated above, utilization is determined when your credit is pulled (using the info on your report(s)) so the score will bounce back.  While we don't know the exact algorithms at play, all else being equal the end utilization would probably have to be better than the starting utilization (prior to the surge and only to a certain point) for a scoring increase.

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@Desmoire wrote:

Maybe the creditors favor responsibility over all else in regards to large purchases?

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Certainly possible but a creditor's underwriting criteria and the scoring model are two entirely different things.  If you use card A then the creditor issuing card A doesn't have to rely solely on your credit scoring and can look at actual historical usage as well.  One can utilize a card (run the balance up well above ideal utilization) while at the same time maintaining 9% utlization -- or whatever target is desired.  The creditor for the card will know what was charged and what was paid since it's the creditor's own account.

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@Desmoire wrote:

Maybe the creditors favor responsibility over all else in regards to large purchases? Maybe you obtain very high CS quicker by using this method? Or maybe its just the fact that he responsibily never recieved a baddie after that, obtained a car and house loan, and let his AAoA increase dramatically?

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Opening new accounts will not dramatically increase AAoA (without backdating).  It will have the opposite effect.  Without knowing every detail about his credit all we can do is make the generalization that he paid down his utilization before his surge was considered a credit risk.  As stated above, high utilization over long periods of time indicates a risk and can lead to adverse action.  I've been there myself.

2 years of positive history certainly helps with AAoA but also will not provide a dramatic increase with AAoA.

FICO doesn't track utilization over time or else scores wouldn't rebound as utilization decreases.  A creditor, however, can certianly look at past utilization on their own lines when making decisions on credit limits, etc.  Keep in mind that creditors aren't all identical though and that underwriting criteria can and does vary from creditor to creditor.  Your brother's score is what it is today likely in large part to decreasing his utilization.  Had you pulled his scores when his utilization was at his peak you'd see a dramatically different score.

myFICO has a chart demonstrating the weight of each factor when it comes to scoring:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx