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Balance vs. Utilzation Rate For Fico Score

Established Contributor

Balance vs. Utilzation Rate For Fico Score

Here is my question. I have two credit cards. One is paid off in full & the second card has a $ 6 balance on it. Now the utilization rate is at zero. So do I need to have the utilization rate at least 1% or as long as there is a balance showing on one card I am at the optimal place that I need to be? I want to make sure that the 0% utilization is not conflicting with the $ 6 balance.

Message 1 of 8
7 REPLIES
Community Leader
Super Contributor

Re: Balance vs. Utilzation Rate For Fico Score

Your utilization is in fact at 1% -- not 0%.  That is because the actual FICO algorithm (on the back end) rounds all fractions up to the next integer "percent" number.  Thus, for example, if your precise utilization is 9.0032%, FICO will consider that 10%.  This is why you will hear people on this forum urge people to make sure their utilization is under 8.99% (since FICO wants to see a util in the 1-9% range).

 

Most credit monitoring tools round percents to the nearest integer, which ends up giving a misleading idea of what FICO will do.

 

It would totally suck if people had to use a full 1% of their credit limit to avoid not being dinged.  For a person with a 200k total credit limit, that would force 2k of purchases every month.  Thankfully that is not the case.

Message 2 of 8
Super Contributor

Re: Balance vs. Utilzation Rate For Fico Score


@CreditGuyInDixieFor a person with a 200k total credit limit, that would force 2k of purchases every month.  Thankfully that is not the case.

Or, force them to carry a $2000 balance, meaning they'd have to pay interest to maintain the best possible score.

Message 3 of 8
Established Contributor

Re: Balance vs. Utilzation Rate For Fico Score

I lost 15 points because only one card reported with $7.00 balance on total cl of 10,000

It did not round it to 1%. 

 

Message 4 of 8
Community Leader
Super Contributor

Re: Balance vs. Utilzation Rate For Fico Score

Thanks Remedios.

 

If any of the following were true, this would explain what happened.  The card was....

 

(1) An AU card, rather than a card in your name

(2) A charge card, rather than a true credit card

(3) A card with a huge credit limit (35k or more for some models, 51k perhaps for FICO 8)

 

Also might well happen if the score was not a true FICO score.

 

As far as #2 goes, some store cards are classified by FICO as charge cards, even if they seem to you to be true credit cards.  See TT's recent post about this here:

 

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Bankcard-vs-Storecard-when-AZEO/m-p/51894...

 

Message 5 of 8
Established Contributor

Re: Balance vs. Utilzation Rate For Fico Score

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Score is from paid Experian monitoring, Fico 8. 

There were no changes other than two cards reporting within two days from each other.  Last month two cards reported balance. This month one reported 0 and second one $7. 

There were no new accounts, no HP, nothing that I can see, only utilization going from 3% to 0%.  The score drop was from 728 to 712. 

 

Message 6 of 8
Established Contributor

Re: Balance vs. Utilzation Rate For Fico Score

Also, I just looked at reports from 9th,10th and 11th. The drop happened once the $7.00 was reported. 

I don't really care, points will be back, it's just that  I was under impression that it would round it to 1%. 

The best lesson learned out of this is to just let the cards report naturally, pay bill and move on. 

I'm not buying cars or home any time soon. Azeo sucks way too much energy lol 

Message 7 of 8
Super Contributor

Re: Balance vs. Utilzation Rate For Fico Score

Remedious,

 

I can assure you that the $7 reported balance constitutes 1% utilization from the perspective of FICO.  Often times different versions of fluff software will take a .49% balance and round it down.  Fluff software is not the FICO algorithm and any non-zero percentage will always be rounded up to the next integer.  These different pieces of software that provide charts and graphs from different CMSs can be extremely misleading.  Many of them do this (round down to 0%) like CK, CCT, etc.  As long as the $7 balance reported to the bureaus, which it did as the CMS is seeing it, your utilization is indeed 1% from the eyes of FICO.

 

If your score dropped 15 points, it was from a reason other than your $7 balance.

Message 8 of 8