Credit Utilization on cut-off date

[Anonymous]

Hi,

I have been always paying in full for the statement balance. At the cut-off date, I let it report at 5%-10%.

Last month I accidentally have 0% utilization on my chase card. The score jump up from 660 to 733.

This month I let it report 2%. The score goes down to 693.

I wonder what I should do with this one? Use the card, pay it off, report the card at 0% or at below 10%?

I do not carry balance to next month.

[Anonymous]

To get the most help from the people who read your thread, can you clarify for us....

On average, how many of your five cards typically show a positive balance?  Is it all five?  Four?  Three? 

There's no good way to tell what caused your recent score fluctuations unless you produced for people here a full credit report dated the same day as each score.  The score variance was certainly caused by something.

Fortunately, a great deal can be said with certainty about CC balances:

*  If you are preparing for an important credit pull (auto loan, credit card application, etc.) then you can squeeze out some extra points by having exactly one of your five cards showing a positive balance.  A simple amount to remember would 5-10 dollars.  All other cards should in this scenario report $0.

*  Most months, however, you do not need those extra points.  Therefore just use your cards naturally.  Some months all five will have a positive balance, some months only 1-2 cards will.  Just use them according to what makes financial sense.  Keep each card at < 49% of its credit limit and your total utilization (all cards together) at < 29%.  Allow cards to produce statements and then pay the amount in full (PIF) -- you can even set up PIF autopay so you don't even have to do that.

Do you have an open installment loan?  That would be something like an auto loan, a personal loan, a student loan or a mortgage.  If you do not, we can suggest a painless way to get a bunch of extra points.

Your scores are sometimes down in the 660s -- does that mean you have some negatives on your reports?  (Lates, chargeoffs, collections, etc.?)

[Anonymous]

@CreditGuyInDixie:

All of my cards show positive balance. It varies at 3%-10%.

I do not have a need to pull the report right now. For now I am trying to get my score increase as much as I can so I can do auto-refinance in Feb 2017.

My score is down 660 because I maxed out 2 of my cards at that time, but PIF already. I do not have any bad records on my report (well, there is. I have too many inquiries, about 22. 15 of them are auto inquiries, Chase just removed 5 inquiries so it should be down to 2 within next 2 months).

[Anonymous]

Hi Tylor.  Good luck with your upcoming auto re-fi.

Because you are doing a re-fi, that sounds like one of my questions is answered, namely whether you have any open installment loans.  It sounds like the naswer is yes, you have an auto loan you are paying on right now.

From my question about your report, it sounds like you may have not seen yours, or at least don't understand what all is on it.  That's a big concern.  As you prepare for this re-fi, you should be pulling your reports frequently so that you know everything on them and what it means -- only then can you improve your score.  There are tools out there that enable you to pull your credit reports as often as once a week for free.

Moving forward, having all your cards except one report a $0 balance will help.  The remaining card should report a small balance.  Should be at least $5 but otherwise small.  It may take a month or two for the score to stabilize.

[Anonymous]

@CreditGuyInDixie:

Perhap I haven't explained my question clear enough.

My question is that, "Does keeping utilization of cards at 0% (except one or two cards) have any benefit in term of increasing credit score? And why?"

My report stays the same and only the balance of that card comes from 0% to <10% and the score went down 40 pts? I have been eyeing on my score nearly every day (Free score from BoA/Discover (TransU?), Cap1 (EQ?) and from myfico 1B as well. 

Thanks.

[Anonymous]

There are three scoring factors related to credit card balances:

(1)  Total utilization (counting all cards together)

(2)  Individual utilization (counting each card and its credit limit individually)

(3)  Percentage of cards showing a positive balance

A person gets all the points he can from #1 by keeping his total util < 8.99% (but still > 0%).

A person gets all the points he can from #2 by keeping each card < 49%.  It's conceivable that some profiles might benefit from somethng more restrictive but that's doubtful.

With regard to #3 nobody knows exactly how low this % needs to be for optimal scoring.  What is certain is that if you personally had exactly one card reporting a positive balance, then you'd be < 25% which is certain to be optimal. 

So yes, producing several $0 balances on credit cards is helpful to one's score (as long as you are reporting at least one positive balance).  That has been well tested by hundreds of people and it is well documented in FICO's own published literature.

If you want to go further into the "why" question -- i.e. why does FICO give you a higher score for doing #3-- it's because the statisticians who developed the FICO 8 model (back in 2006-2008) found that credit reports that had most of their credit cards with a $0 balance were a sign of a person who were less likely to become seriously delinquent on future accounts.  That's the thing that the FICO score measures -- how likely is this person to become seriously delinquent in the future?

[Anonymous]

Thanks a lot for the explaination.