Credit Utilization — Important to keep every card under 30 percent?

[SpiritSoul11]

Hey guys,

So I am just getting started with credit repair and building after many years of negligence. I have been learning a lot about how FICO scores are calculated and I have heard that credit utilization makes up 35% of ones score, and that our total credit utilization should stay under 30% and under 10% is even better.

My question though relates to the credit utilization on each individual card. My plan is to pay off every card every month, but I would like to know if all my cards equal $10,000 in credit, and my total utilization is 10 percent, but one of my cards has 60% ulilization, does that adversely affect my FICO score? Thank you so much.

[Adkins]

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@SpiritSoul11 wrote:

Hey guys,

So I am just getting started with credit repair and building after many years of negligence. I have been learning a lot about how FICO scores are calculated and I have heard that credit utilization makes up 35% of ones score, and that our total credit utilization should stay under 30% and under 10% is even better.

My question though relates to the credit utilization on each individual card. My plan is to pay off every card every month, but I would like to know if all my cards equal $10,000 in credit, and my total utilization is 10 percent, but one of my cards has 60% ulilization, does that adversely affect my FICO score? Thank you so much.

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Yes, you will lose some FICO points for that one card reporting over 8.9%. Your overall utilization will be ok. If you're concerned about maintaining the maximum FICO score, your best best is to pay all the cards down to zero BEFORE the statement cuts EXCEPT one; let that card report under 9%, and then pay it. (The card that reports cannot be a Chase card as chase reports a paid card immediately.) This is call AZEO. 

[SouthJamaica]

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@SpiritSoul11 wrote:

Hey guys,

So I am just getting started with credit repair and building after many years of negligence. I have been learning a lot about how FICO scores are calculated and I have heard that credit utilization makes up 35% of ones score, and that our total credit utilization should stay under 30% and under 10% is even better.

My question though relates to the credit utilization on each individual card. My plan is to pay off every card every month, but I would like to know if all my cards equal $10,000 in credit, and my total utilization is 10 percent, but one of my cards has 60% ulilization, does that adversely affect my FICO score? Thank you so much.

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1.  The "under 30%" principle for aggregate utilization, while often bandied about, is not correct. With 29% utilization your FICO 8 scores could be getting penalized 60 or 70 points.

2. Individual utilization is a totally separate metric which will hurt your score regardless of how good your aggregate is. Here under 30% is an important threshold.  30% will hurt you but 29% won't.

[rostrow416]

There are penalty milestones for different utilization thresholds, yes.  29% overall and on an individual card are both applicable.  I just took a penalty because a card reported 80% utilization even though my overall is at 4%.  

[Anonymous]

Yes, you will get dinged if you max out a card or put most of the utilization on one card. 2 years ago I maxed out a card and at 7% total utilization, I lost 40 points.

I have a card at about 70% utilization and I'm down about 25 points. On the 20th of this month, the utilization will be either 85% or 95% on the card. Either way, 85 or 95 is pretty much maxed out and I expect to lose another 10 to 15 points, at least (I got higher balances on almost all my other cards too). My total utilization will be 8 to 10%. Having higher utilization on other cards while maxing out another will get you a harder FICO slap. 

Of course, one's profile will vary how many points you will lose maxing out a card or putting high utilization on one card.

[SpiritSoul11]

Wow! And if I can pay off the card that month will the score go back to normal or will there be some residual effect for maxing out the card?

[thornback]

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@SpiritSoul11 wrote:

Wow! And if I can pay off the card that month will the score go back to normal or will there be some residual effect for maxing out the card?

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There is no delay. All points lost due to utilization are returned as soon as the $0 balance is reported.

[Anonymous]

The post above is correct.  Utilization is a single moment in time metric based on what data is on your CR at the time the score is generated.