Score Increase from Lowering Util

[Anonymous]

This is a very good question regarding utl. However, I would like further elaborate this question since jimbo situation is similar to mine. I did the score simulator paying down my open ccs to 0 and it improves 100 points, but would charge offa and collection be counted towards utl? I pulled my cr with annualcreditreport.com and it states my utl is only 5%.hopefully what I'm asking makes sense

[Anonymous]

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@Anonymous wrote:
This is a very good question regarding utl. However, I would like further elaborate this question since jimbo situation is similar to mine. I did the score simulator paying down my open ccs to 0 and it improves 100 points, but would charge offa and collection be counted towards utl? I pulled my cr with annualcreditreport.com and it states my utl is only 5%.hopefully what I'm asking makes sense

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Charge offs and collections do not count towards utilization.  You will see zero effect on your score by paying charge offs and collections because a paid one hurts just as bad as an unpaid one.  Utilization only counts open revolving accounts (it excludeds installments like mortgage and auto loans, etc).

[Anonymous]

Currently I have a balance of 54000 on my score simulator but this is inclusive of charge offs, I put in paying 100 a month for 12 months and my score jumped to almost 100 points, is the simulator counting towards charge offs as well, it's so confusin! Also the paying on time scenario, do charge offs inclusive as well?

[GoodCredBen]

it is only counting towards curring credit balances. 

[MarineVietVet]

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@Anonymous wrote:

 

Charge offs and collections do not count towards utilization.  You will see zero effect on your score by paying charge offs and collections because a paid one hurts just as bad as an unpaid one.  Utilization only counts open revolving accounts (it excludeds installments like mortgage and auto loans, etc).

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There is one situation in which a CO does count toward utilization. If the CO is a credit card and both the credit limit and balance are reporting then this account is factored into utilization. In this case paying off the balance will help your score by lowering utilization.

[Anonymous]

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@MarineVietVet wrote:

There is one situation in which a CO does count toward utilization. If the CO is a credit card and both the credit limit and balance are reporting then this account is factored into utilization. In this case paying off the balance will help your score by lowering utilization.

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Thanks for pointing that out!

[MBOhio2]

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@namvet wrote:

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@Anonymous wrote:

I am working on getting the max possible score over the next month to try for an auto refinance.

Anyway, my situation is that I have a couple very old collections (5-7 years) and a couple about 2-3 years old.  I have a good credit card with perfect history that is 20 months old and another that is 7 months old.  I also have many student loans that range from 6 months to 12 months old.  I am currently working on any possible PFDs for those collections, but not going to count on that.

My current utilization is about 77%.  I just made payments on both cards to bring them down to about 25%, so they will next report those balances.  My question, is that a good balance?  I have read that to max your score, you want 0% on all but one that is like 5-9%.  However, I don't think I'm quite in the category of maxing scores with my poor credit.  Is there much to gain by paying them from 25% down to 10% or would that be minimal?  I would rather hang on to that money until next month in savings if the gain isn't gong to be much.

Thanks

The magic number is 30% or less on your utilization.  Hang on to your money.  Less is always better but 25% is good. 

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This is one of those things that really varies from person to person and in fact, many people report that they got a large bump when they went under 20%. These are certain "sweet spots" that people tend to report increases at, both of which are 30% and 20% but I do not think it is universally accepted that 30% is the magin number and typically, people do see increases (sometimes large ones) when they go under 30%, under 20%, under 9%, etc.

[Anonymous]

Thanks for the feedback everyone.  It looks like there are still decent gains to be had by going lower.  I already paid my wife's CC off in full today, and I will get mine down to 5% before it reports on the 3rd.  Thanks again!

[namvet]

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@Anonymous wrote:

Thanks for the feedback everyone.  It looks like there are still decent gains to be had by going lower.  I already paid my wife's CC off in full today, and I will get mine down to 5% before it reports on the 3rd.  Thanks again!

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  Remember one thing.  Credit scores are all about risk to the lender.  These scores were developed many years ago to cut down charge offs (defaults) on consumer loans.  Loans that did not perform were looked at and certain information appeared more than other information such as:  Time on job, amount of debts, home owner,credit history,types of credit etc.  One factor was clear and still is today.  Less debt means less risk.