Credit card utilization

[Anonymous]

Hey forum members,

Currently my credit card utilization is between 11-15 percent overal, just really depends on what final transactions post before my cut dates. I know it's best to keep utilization under 30 percent and ideal would be around 10 percent overall. Currently I am around 40 percent utilization on Amex because of zero APR and also around 40ish percent with capital one because of zero apr. My barclay, csp, freedom and BOA BBR are PIf and let 30ish dollars cut for BBR every month for the 30 bucks cash back quarterly.

Am I losing points because my two cards carry a balance around 40ish? Or is it not that large of an impact per individual card considering my overall utilization.

Mods feel free to move if it's in the wrong section, if so sorry.

[Anonymous]

You are losing some points for having any card over 30%, yes.

Ideal (maximum points for utilization) FICO scoring happens when all of your cards have zero balance except one - which has a balance under 10%.

Second-best (and generally most practical long-term) is having all accounts reporting at under 30% each cycle.  Any single account over that 30% mark will reduce your scoring, even if others are at zero and the overall average is under 30%.  It's an overall utlization score, but each part (card) must be under 30% across the board in order to get all of the available points for utilization.

If you are carrying balances to take advantage of promotional financing on a large purchase, or a balance transfer promotional rate, or whatever, that is fine - just know that your score will not be as high as it could be until those balances are paid off.  If you're getting zero percent for a year on a balance you need to pay over time, then you are saving real money that way.  FICO points are not real money - and if you are not actively seeking new credit, then you will be fine if your score isn't maximized for a few months.  Utilization has no memory, as you hear so often on this forum, and when you need your score to be in prime shape again, you can pay balanced down and configure yourself for a maximum score on utilization.

[Anonymous]

Thanks for clairifying. Yeah made a large purchase on Amex and taking advantage of the zero APR. but with Cap One it's more of my day to day spending and just happens to cut before I make my large payment. Good thing is im not looking to acquire any cards unless Chase CSR happens to show up with an invitation I'll leave the garden.....

[NRB525]

OP, what are your FICO scores? 

[Anonymous]

Fico 8 as of last night is:

Ex: 688 with two charge offs cap one 2013, one 90 day cap one 2012.

Tu: 694- same baddies

Eq- 665 same baddies and also 90 day late for mortgage from 2010.

Utilization is reporting at 22.5 percent, but come tomorrow it will be around 12ish.

CSP-10,300
Freedom-6300
BBR- 1500 w/ 29.99 balance
Barclay rewards- 3500
Cap one 6500 (as of this morning) w/ 1647 balance
Amex BCP- 3k 1400ish balance

Average age of credit is 2.7 years

[p-]

My scores below came with one card having a balance, total utilization over all cards around 3%.  This worked best all the way through my rebuid and still works now.

[Anonymous]

I personally don't think my scores will change that much because of the fico bucket that I am in. But looking to purchase a car with in the next six months and want to plan out my utilization to maximize my fico since that's the biggest and quickiest way for me to maximize scoring. My current car loan is with Baxter Credit Union and it's at 4.29 apr

[Anonymous]

@p sorry I'm in mobile can't see your scores

[Anonymous]

Hi AndyD.  You write:

"I know it's best to keep utilization under 30 percent and ideal would be around 10 percent overall."

When you say that it's ideal to keep your utilization at about 10%, that would give most people the impression that 10% is the "sweet spot."  Not too much less than that or more than that.  In particular that you'd expect 10% would do better than 5% or 3% (say).

This would not be true.  Any total/aggregate utilization in the 1-9% area is equally fine.  There's no advantage at all to trying to keep it close to 10%.  Indeed, because FICO rounds percents up to the nearest whole number, a utilization of 9.01% would be treated as 10%, which is not in the 1-9% range and therefore not ideal.

The most important thing to do when making a credit plan is to first identify what your needs are.  I.e. when is the next time you will need to apply for credit and what kind of credit will you be applying for?  And is there anything after that?  Only after you have identified your needs is it possible to answer the question "What should I do?"  There is no single answer to that question that applies to everyone.

In your case, this would be a description of your needs and desires:

     (1) Do I need any more credit cards?  Nope, I have six, I am fine there.

     (2) Do I plan to apply for a loan?  Yes, a car loan in six months.  I want to raise my scores so that they are ready to get the best rates I can.

Now that you know your credit needs, you can infer that you do not need to keep your utilization at any particular number in the next few months.  For example, it wouldn't be a problem if your utilization was 45% for the next few months.  You just need to be making all your payments on time -- and have a plan for getting all your CC debt paid off (if possible) before the loan application.  (You will still want a smallish balance on one card, as has been explained to you.)

Hmw_75 hit on this when he explained the difference between maximizing your score just before a credit application and a long term strategy in the months or years leading up to it.

[Anonymous]

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@Anonymous wrote:

You are losing some points for having any card over 30%, yes.

Ideal (maximum points for utilization) FICO scoring happens when all of your cards have zero balance except one - which has a balance under 10%.

Second-best (and generally most practical long-term) is having all accounts reporting at under 30% each cycle.  Any single account over that 30% mark will reduce your scoring, even if others are at zero and the overall average is under 30%.  It's an overall utlization score, but each part (card) must be under 30% across the board in order to get all of the available points for utilization.

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I really liked your response to the OP, especially how you explained the difference between maximizing your score just before a credit application and a long term strategy in the months or years leading up to it. 

Just wanted to let you know that the stuff I have highlighted in blue above is not stuff everyone agrees about.  Most of the veterans here are very doubtful that there is any scoring advantage to keeping a card under 10% of its individual credit limit and quite a few are skeptical that there is an advantage to keeping each card under its own 30% mark, assuming that you have your total util < 9%.  (Though some contributors, like my friend SouthJamaica, believe that 30% is a crucial individual breakpoint.)

The individual breakpoint (for individual U) that these skeptics are more comfortable recommending is 49%.  I am one such person.

In practice these distimctions don't matter, since you and I would tell our OP that he should just try for the easy-to-remember rule of:  Pay all cards to zero except one (which should have a small balance).  That's simple advice that will end up in the same place.  But I am just letting you know that as a matter of FICO theory not everyone would be able to get on board with what you said.