Credit Score and High Utilization

[Anonymous]

Hello,

What are the implicaitons of high credit utlization over time? I have a high credit utilization (90%+)  but plan on paying down a huge chunk of it in the next month to where it will be 25% or less.

I had a high utilization for a period of months, only paying min. payments. Will the 90% over the course of 12 months come back to haunt me or dot he credits scores just adjust for that point in time?

I'm expecting a decent bump from paying them down.

Also, I was recently denied a auto loan due to short credit history (2 years...I'm 25 so not much I can do there), high utilization, and also too many accounts (CC's) with balances.

So I'm guessing they want more cards/accounts with zero balances? Also, lower utlization. I plan on getting zero balances on several, but wondering but util.

Another issue I have is wondering if I have too many credit cards. Currently have 12 credit cards including 1 store credit card. The rest range from pretty much every major credit card out there....

Once I get my high utilization down to less than 15%, should I consider cancelling cards or just keeping them and not using? Only a few have annual fees. 

[Anonymous]

My comments below.  Best of luck, pal.

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@Anonymous wrote:

Hello,

What are the implicaitons of high credit utlization over time? I have a high credit utilization (90%+)  but plan on paying down a huge chunk of it in the next month to where it will be 25% or less.  Good for you! 

I had a high utilization for a period of months, only paying min. payments. Will the 90% over the course of 12 months come back to haunt me or dot he credits scores just adjust for that point in time?  No it will not.  No effect at all.  In the future, FICO and Vantage will likely begin tracking that kind of behavior, in which case people will get rewarded for always paying their CC balances in full (and losing points for only paying the minimum).  That won't start being implemented in practice for years, however, as far as I can tell.

I'm expecting a decent bump from paying them down.

Also, I was recently denied a auto loan due to short credit history (2 years...I'm 25 so not much I can do there), high utilization, and also too many accounts (CC's) with balances.

So I'm guessing they want more cards/accounts with zero balances? Also, lower utlization. I plan on getting zero balances on several, but wondering but util.  Yes.  You ideally want all your CC's (except one) to report $0 and you want your total U to be in the region of 1-5%.  You do not need to worry about achieving this every month.  Just get the zeroes and the low U the month before you need your credit score to be optimal.  It's a short term strategy.  Long term strategies are things like paying your bills on time and paying your cards in full (the latter prevents you from paying interest and keeps your overall U fairly low).

Another issue I have is wondering if I have too many credit cards. Currently have 12 credit cards including 1 store credit card. The rest range from pretty much every major credit card out there....  You don't have too many (i.e. your score is not being hurt by FICO seeing a large number of cards), but you absolutely don't NEED any more.  All you need is three to power a very high FICO score.  Part of the reason your score is not higher is that you kept applying for cards you didn't need, which kept lowering your average age of accounts, added inquiries, and kept registering as a new revolving account, all of which hurt your score somewhat.

Once I get my high utilization down to less than 15%, should I consider cancelling cards or just keeping them and not using? Only a few have annual fees.  You should review the ones with annual fees and do the math and see whether the fee is worth the benefit you get from it.  I have a card that a pay an annual fee for (Amex Blue Cash Prefered) but I only did that after very carefully crunching the numbers and seeing that I would come out ahead even after paying the fee.  Otherwise I think there's a huge amount to be said for keeping cards around and just letting them age.  I do think you have WAY more cards than you need, so what I would definitely be careful about doing is applying for more.

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