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Credit Utilization Game!!!

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Contributor

Credit Utilization Game!!!

Suppose that I have a total of 5 Credit Cards, each with a credit limit of $10,000 for a total credit availability of $50,000.

 

Now suppose that I will have a need to carry a balance of $10,000 for the next year or two.

 

The question, which is strictly about credit score optimization not financial optimization, is:

 

Am I better off charging all $10,000 to one of my 5 cards and carrying the balance just on that one and Zero balance on the other 4?

 

or 

 

Am I better off carrying a $2,000 balance on each of my 5 cards.

 

Either way I'm using 20% of available credit but Which option will positively impact my credit scores more?

 

I'm looking forward to your opinions and advice.

 

 

Thank you,

 

Poquelin

 

 

Starting Score: 638

Current score:
Equifax 680
Trans Union 718
Experian 714

Target Score: 725 Across the Board
Message 1 of 12
11 REPLIES 11
Super Contributor

Re: Credit Utilization Game!!!

Do any of the 5 cards have a 0% APR that is available for the year time period? If the other 4 cards all have significantly expensive APR (12% - 25%) then the borrower should find a way to get the borrowing on the 0% APR card, FICO score be darned, because saving cash interest expense counts for more than any temporary FICO score issues.

 

If all interest rates are equivalent, then sharing the load on all the cards is better, because it equalizes the utilization and is less likely to raise concerns at the CCC about high balances.

 

In any event, monthly payments should be at least 2x the minimum payment, and should be in the neighborhood of $1k per month, to stay on the 12 month plan. Large monthly payments do wonders to calm down CCC.

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
Message 2 of 12
Contributor

Re: Credit Utilization Game!!!

Thanks NRB525, that helps me a lot.

 

i've just never been sure if one way is better than the other because to me is the same 20% utilization rate but I never knew if the powers that be prefer one way over the other.

 

thanks again.

Starting Score: 638

Current score:
Equifax 680
Trans Union 718
Experian 714

Target Score: 725 Across the Board
Message 3 of 12
Valued Contributor

Re: Credit Utilization Game!!!

I think you'll lose a lot more points by carrying balances on all 5 cards.

I would put $5k on 2 cards and then make payments asap to get them below 50% utiliz.

I think balances on 2/5 cards looks a whole helluvalot better and won't hurt your score as much compared to 5/5 cards carrying balances.

 

I have a single card reporting 82% utiliz, overall 15% utiliz, and 5/20 cards carrying balances.

Message 4 of 12
Established Contributor

Re: Credit Utilization Game!!!

2 out of 5 cards. $4999 on each. make min payment +$1 and pay $2 off orig balance


Current Score: EX 712 4/28/15, TU 713 4/14/14 lender pull, EQ 723 9/16/15, 740 EQ bankcard 8 6/1/15 lender pull
Last app 03/12/17


Message 5 of 12
Established Contributor

Re: Credit Utilization Game!!!

what racer-x said.  payments will depend on if you want to maximise internal score


Current Score: EX 712 4/28/15, TU 713 4/14/14 lender pull, EQ 723 9/16/15, 740 EQ bankcard 8 6/1/15 lender pull
Last app 03/12/17


Message 6 of 12
Super Contributor

Re: Credit Utilization Game!!!


@racer-x wrote:

I think you'll lose a lot more points by carrying balances on all 5 cards.

I would put $5k on 2 cards and then make payments asap to get them below 50% utiliz.

I think balances on 2/5 cards looks a whole helluvalot better and won't hurt your score as much compared to 5/5 cards carrying balances.

 

I have a single card reporting 82% utiliz, overall 15% utiliz, and 5/20 cards carrying balances.


On an individual card, the score preference is to have that card utilization below 30%.

If the two cards in question are the only of the 5 which have 0% APR offers, that trumps the 30% question, cash trumps FICO.

Otherwise if all cards are charging interest, then keeping the load spread among all the cards is better. It also shows good payment and borrowing history to all 5 cards in that case, and for longer term CCC relationship management is a better way to go.

 

Of 15 cards I have that are not closed and are reporting, they all have some sort of balance reporting, from 2% to 55%, soon to be 72% on a $1k card with a new BT. Each of the large limit cards that are on 0% or low interest BT offers started at 70% to 95% when the BT first hit each card, those 5 are now from 31% to 55% utilization, with a CLI of $3k a few weeks ago on one that dropped the utilization down to 40%. This card started with a 84% utilization BT load at the end of October, paid heavily to get it to 51% utilization just before the surprise auto CLI in February. And yes, this is an account that had been balance chased in years past, to $12,700 CL, now up to $15,700.

The two closed cards also have balances, the DC Premier has a balance but is not reporting.

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
Message 7 of 12
Valued Contributor

Re: Credit Utilization Game!!!

Op said hes not worried about money and interest rates. He stated what was best for his score.

In my experience, the fewer cards having 0 balance the better. 49% utiliz on 2 cards aint squat. Im carrying 82%, 45%, 48%, 28%,28% on my 5 cards out of 20. Im flirting with 720 across the board.
Message 8 of 12
Super Contributor

Re: Credit Utilization Game!!!


@racer-x wrote:
Op said hes not worried about money and interest rates. He stated what was best for his score.

In my experience, the fewer cards having 0 balance the better. 49% utiliz on 2 cards aint squat. Im carrying 82%, 45%, 48%, 28%,28% on my 5 cards out of 20. Im flirting with 720 across the board.

Get the 82% down and it will improve your score. I know there are probably reasons it can't be brought down immediately, but in FICO scoring it would help. If you are on a low APR offer, leave it at 82% and disregard FICO.

 

In my opinion, FICO scores are interesting, but the financial aspect must be considered, even if OP does not want to consider it. This next theoretical year or two has some potentially disappointing or regretful interest expense, if all cards are at 22% APR and only one has a 0% APR offer.

 

Long term, the only thing that matters in FICO scoring is making all payments on time. Utilization is a short term phenomenon that does influence FICO, but getting a lower APR helps reduce that utilization faster, because cash is not going to interest expense.

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
Message 9 of 12
Valued Contributor

Re: Credit Utilization Game!!!


@racer-x wrote:
Op said hes not worried about money and interest rates. He stated what was best for his score.

In my experience, the fewer cards having 0 balance the better. 49%utiliz on 2 cardsaint squat.Im carrying 82%, 45%, 48%, 28%,28% on my 5 cards out of 20.Im flirting with 720 across the board.

Do you mean that as it sounds?  The FEWER cards having $0 balance the better?  That pretty much goes against all that I have learned here, and experimented through my own profile.  I recognize that all profiles are different, however I have played with balance reporting quite a bit over the past year.  In my case, I have found optimum scoring with ONE account showing a small balance, and all other accounts showing $0.  I have found that if I let a second card report a small balance that I loose 4 to 5 points.  I do not seem to loose any additional points going from 2 to 3 cards reporting a balance, however going beyond the three I really start to get hit.  

 

 

 

Year 2012: All Scores in the 520 range, during a foreclosure, CC Settlement and high UTIL. Very ugly days...
Aug 2019: EX8: 850; EQ8: 850; TU8: 850 -- Middle Mortgage Score: 820
In My Wallet: Discover $73.7K; Cap1 Venture $36.7K; Amex ED $38K; Amex Optima $2.5K; Amex Delta Gold $18K; Citi Costco $16.5K; Cap1 Plat $8.4K; Barclay $7K; BoA Plat $21.6K; Citi TY Pref $18K; US Bank $4K; Dell $5K; Care Credit $6.5K. Total Revolving CL: $266K
My UTIL: Less than 1% - Only allow about $10 a month to report, on one account. .
Message 10 of 12
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