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0% utilization worse than 40-50% utilization.

Super Contributor

0% utilization worse than 40-50% utilization.

I just thought I'd post this because I would expect the opposite to be true.  At least that was my perception.  I know all profiles are different, so I'm speaking about my profile here.

 

I've always read how letting a small balance report on one card maximizes scores, so I always thought the "second best" option would be simply to PIF all accounts while letting nothing report.  Not true.  Letting much higher aggregate utilization report, at least for me, results in far better scores.

 

When I dropped my aggregate utilization by about 40%+, I saw on average a gain of 3 points across each bureau.  I started monitoring my scores with aggregate utilization at about 48%, dropped it to 36% and then dropped it to 6%.  I did this over the course of a few weeks so this was the only major change to my profile.  A couple of weeks back I accidentally let all $0 balances report, so my scores all dropped, 14-20 points.  This week I allowed a balance to report, repulled my scores and regained the 14-20 points lost, +/- 1 point.

 

So for my profile, in summary, compared to reporting 1%-9% utilization:

0% reported = 14-20 point drop

36-48% reported = 3 point drop

 

 

 

 

 

Message 1 of 23
22 REPLIES
Senior Contributor

Re: 0% utilization worse than 40-50% utilization.

Message 2 of 23
Frequent Contributor

Re: 0% utilization worse than 40-50% utilization.

36-48% util = they've got you where they want you

0% util = you've got them where you want them. Not to mention in your back pocket if you need them.

 

Still surprised?  Smiley Wink

FICO 8:  EQ:687  TU:728  EX:735
Message 3 of 23
Super Contributor

Re: 0% utilization worse than 40-50% utilization.


pipeguy wrote:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Paid-off-car-loan-FICO-dropped-Got-a-new-...


I'm not seeing how that thread has any relevance to what I posted.

Message 4 of 23
Super Contributor

Re: 0% utilization worse than 40-50% utilization.

Yes, still surprised as I would expect someone with 35-45% utilization to be viewed as more of a risk over someone that reports 0% utilization.  Don't get me wrong, I completely get the concept of taking a hit for not showing any utilization.  However, FICO scores are supposed to attempt to gauge risk, and someone at 35-45% utilization especially with big credit lines is quite a risk IMO.  For some people on here with $100-$200k in credit lines, 35-45% could represent $35,000 - $90,000 in debt.  Just my opinion here, but that to me seems like a far greater risk than someone reporting no utilization. 

Message 5 of 23
Frequent Contributor

Re: 0% utilization worse than 40-50% utilization.

Totally agree with your opinion, however I'd submit that the missing variable for us is what Is the end game for the creditor? Sure calculating risk, but to what end? Profit. Period. Motivation is the lynchpin. We're all just decent people trying to sift thru data, and make good decisions, but for them? It's all about money. When you look at it like that, the guy their making it off of is higher up the conga line than the guy who isnt. That's why it doesn't make sense to us. We just think is all about risk... not even close.

FICO 8:  EQ:687  TU:728  EX:735
Message 6 of 23
Super Contributor

Re: 0% utilization worse than 40-50% utilization.

I can understand that from the perspective of the creditor, but we're talking FICO scores here which aren't designed by the creditor.  Were FICO algorithms designed with creditor profit in mind? 

Message 7 of 23
Senior Contributor

Re: 0% utilization worse than 40-50% utilization.


BrutalBodyShots wrote:

pipeguy wrote:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Paid-off-car-loan-FICO-dropped-Got-a-new-...


I'm not seeing how that thread has any relevance to what I posted.


If you have a $00 balance on the revolving credit factor, it doesn't get scored resulting in a drop of "current and future" credit risk aka FICO scores. Let 1 account "report" a $1 open balance and "revolving" gets scored, it's that simple - same thing happens when you pay off a car (installment) loan.

Message 8 of 23
Super Contributor

Re: 0% utilization worse than 40-50% utilization.


pipeguy wrote:


If you have a $00 balance on the revolving credit factor, it doesn't get scored resulting in a drop of "current and future" credit risk aka FICO scores. Let 1 account "report" a $1 open balance and "revolving" gets scored, it's that simple - same thing happens when you pay off a car (installment) loan.


Again, I don't see how that has any relevance to my post.  If you read my original post, I understand completely how reporting $0 results in a score drop as revolving utilization isn't being used.  What I don't agree with, however, and my point of the post is that I don't believe that a person reporting 0% utilization is "more" of a risk than someone reporting 40%-50% utilization.

I understand the score drop for showing no utilization, I just would have expected a greater score drop to exist for most people if they went from 1% utilization to 50% for example, as that represents a large risk increase.  For someone with $100k in credit lines, going from $1000 in debt to $50,000 in debt to me is much more significant than them paying off that $1000 and having no debt (utilization) reported... but scoring doesn't reflect that.

 

Message 9 of 23
Senior Contributor

Re: 0% utilization worse than 40-50% utilization.

I was replying to your comment:

 

I've always read how letting a small balance report on one card maximizes scores, so I always thought the "second best" option would be simply to PIF all accounts while letting nothing report.  Not true.  Letting much higher aggregate utilization report, at least for me, results in far better scores.

 

If I misread your intent, my bad....

Message 10 of 23