Credit Card Utilization

[John060675]

Dear Forum Members,

I am attempting to rebuild my credit, and I know that continually paying on time is the best way of doing this (35% of FICO scoring).  However, I want to know what the best method of paying is as it relates to utilization percentage.

I have read on this forum that it actually hurts your score to have a 0% utilization and that 1% to 10% is the way to go.  I just want to make sure that this is the case before I attempt to do it.  I have 3 credit cards open currently with a combined credit limit of $2,500 ($1,000, $1,000, and $500 respectively).

Should I carry a balance on 1, 2, or 3 of the cards?  How much on each?  Or is it better to use them and then pay in full before the statement closing date?

I appreciate the help on this matter.

[Anonymous]

30% of scoring, not 35%.

Allow one of the cards to report a balance of less than 9%. 

Make sure you pay the other two to 0 before the due date.

[ScoreBooster]

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@Anonymous wrote:

30% of scoring, not 35%.

Allow one of the cards to report a balance of less than 9%. 

Make sure you pay the other two to 0 before the due date.

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The OP is actually correct - the payment history is 35%, the utilization is 30%.

I'd like to add that IF the CCs that should report a $0 balance have no grace-period and/or a monthly fee, it's actually recommend to "overpay" them a bit so that they carry a credit balance to cover said fees.

[John060675]

OK, thank you for the response.  Sorry to ask more questions on this, but what percentage on the one card is the best (if any)?  If I leave a 1% balance will this do more than a 9% balance?  Or can I leave just $5 on a card, which would be rounded down to 0%, and still get the same bump in score each month?

[llecs]

Get one of the three to report under 9% (util rounds up so 9.1% is effectively 10%) and get the other 2 to report $0. $0 balances are important. You can tinker with that one catd to squeek out an extra point or two....might be $5, might be $25. YYMV.

[valley_man0505]

I agree that 1% - 9% utilization is best.  I am a little unclear on the advice given to have two cards with $0 balance and the other at 9%.   Shouldn't the 1 - 9% be based on TOTAL utilization?

For example, say someone has 3 CC, and their CLs are $500, $500, and $5000.  Now, if one of the $500 CL CCs and the $5000 CL CC both had a $0 balance and the other $500 CL CC was paid to 9%, this would mean a total debt of $45 against an available credit of $6000.  The results in a TOTAL utilization of 0.75% (rounded to 0%or does this round up to 1%?).

Maybe this is just a clarification, but shouldn't the advice be to pay 2 cards down to $0 balance, and have the third card report a balance equal to 1-9% of the TOTAL available credit (not just 9% of the available credit on that particular card)?

This scenario is not that likely to happen for someone with only 3 CC since it requires such an extreme range between lowest and highest CLs, but I just wanted to make sure there is no confusion.  I could potentially be affected by this scenario since I have cards with the following CL's

$500

$500

$600

$900

$1100

$1100

$3500

$4000

If I only left 1 card $45 report (9% of $500) with all the others reporting $0, my total utilization would be WAY under 1% (0.37% to be exact).

Oh, and I really did not realize I had so many cards until I actually listed them.  WOW.  In my defense, 3 out of the 4 cards with 4 digit CLs are store cards, so they are mostly "useless" for anything other than increasing my available credit for credit scoring purposes.  The only one of those that is not a store card is completely useless since this is my Cabelas card ($3500) which was closed due to fraud when someone tried buying a $3 cup of coffee in some other country (it still reports as open with a $3500 CL even though I can not actually use it anymore).

[Anonymous]

I hear ya.

FICO scores on overall utilization and each revolving account's utilization.

If you let all your CC's but one report zero utilization; with the remaining one reporting less than 9% - then your overall utilization will also be between 0-9%.  Remember utilization is always rounded up.

Following this advice, you're good on both individual and overall utilization.

[valley_man0505]

Ok, I get it.  Wasn't sure if it always rounded up. 

[John060675]

Thanks for the advice.  I will try to rotate a 3% to 5% balance on each card per month to see what happens.  Then I will play with the percentages a little to see the results (if any).