Does Credit Utilization of 30% Represent 255 points lost/gained?? I need Help!!

[Carlosjb3]

Good evening,

I have a tough journey ahead of me in repairing my credit and I need guidance and understanding on how to achieve 700+ scores in the forseeable future. Please bear with me.

From my understading credit utilization represents 30% of your fico score that ranges from 300-850 which when doing the math that is 255 points max for the credit utilization category correct? Does this mean that if my utilization is at 100% I lose 255 points? If I bring it back down to between 1-3% utilization overall do I gain over 200 points for this category??

For example, my credit utilization is absurdly high at 100% with my scores being EQX 602/TU 560/EXP 601.

Does this mean that I've lost the maxed amount of points of 255 on credit utilization since I'm maxed on all my credit cards?

I have two credit cards that are maxed out.

What if I pay of both of my credit cards leaving a small balance in 1 of the cards reducing my overall utilization to between 1-3% will I gain 200 plus points/max out on my score for this category?

I hope I didn't confuse anybody with my questions but I'm trying to understand how this works on my way to repairing my credit. I tried searching the board for an answer but I didn't quite find what I was looking for. I should be able to payoff both of my credit cards in full in 2 months. Thanks in advance for any input.

About my credit report:

• Scores are EQX 602/ TU 560/ EXP 601
• 2 secured credit cards (Discover & Capital One maxed out but will pay off in 2 months). Current with no lates on credit report. I've had both cards for 8 months and 12 months respectively with combined limit of $2500
• 1 car loan that is 1 year old that is current with no lates on credit report.
• 9 hard inquiries but they were all in 2017
• 1 collection account that is 2 years old through TU & EXP (at&t uverse)
• 2 Payday loan accounts that was charged off 3 years ago but reporting $0 balance.
• 3 credit card accounts that were charged off 3 years ago but I paid them off they are reporting $0 balance
• 0 public records/judgements
• 2.8 years average age of accounts

[Anonymous]

The category you are thinking of is not "CC Utilization" but "Amounts Owed."  Total Revolving Utilization is one factor of several from the AA category, which includes the amounts you owe on loans, the utilization of each card considered separately, the number of accounts with a positive balance, etc.

Here is a link that will help you learn more about the breakdown:

https://www.myfico.com/credit-education/whats-in-your-credit-score

Even if we consider all the factor in the AA category together, they don't add up to 255 points, for the reason that the lowest the score can go is 300.  The spread of points is 550 (300 to 850) and so if you wanted to do what you had been thinking of it would have involved multiplying 30% by 550.

Even still there are reasons that the spread isn't a full 550.  For one reason it is actually not possible to score a 300, even though FICO seems to imply it is.  Then there is also the fact that each consumer is assigned to one of 12 scorecards, all of which have different ranges in the FICO 8 model.

All of this is by way of saying that total CC utilization is not weighted 0-255 points -- significantly less than that.

Nonetheless it has a substantial effect on your score and you should certainly avoid maxxing out your cards.  It hurts your score a lot and also increases the chance that your issuers might close your cards.

Your rebuilding steps are simple:

     * Never make a late payment again -- not ever.

     * Pay off all your CC debt.

     * Make sure that one card always reports a small positive balance.

After you have demonstrated good behavior for a year, you can begin exploring whether you might be able to get your derogs deleted (improbable but possible with enough persistance on your part).

[Thomas_Thumb]

My guestimate is dirty scorecards may span a range up to 350 points whereas clean scorecards have a narrower band of perhaps 250 points at most.

If score were to drop more than 200 points while staying clean it likely includes a scorecard reassignment.

For example, I believe there is a scorecard change tied to a drop in AoYA when new accounts are opened - if AoYA  had been over 24 months previously and new accounts are opened then profile is assigned to a "new credit" scorecard.

There is a scoring metric associated with "time since most recent account is too short" that ties to a 12 month timeframe. However, that timeframe is a threshold for scoring, not scorecard assignment.

[Anonymous]

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@Carlosjb3

From my understading credit utilization represents 30% of your fico score that ranges from 300-850 which when doing the math that is 255 points max for the credit utilization category correct? Does this mean that if my utilization is at 100% I lose 255 points? If I bring it back down to between 1-3% utilization overall do I gain over 200 points for this category??

For example, my credit utilization is absurdly high at 100% with my scores being EQX 602/TU 560/EXP 601.

Does this mean that I've lost the maxed amount of points of 255 on credit utilization since I'm maxed on all my credit cards?

I have two credit cards that are maxed out.

 

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You sort of answered your own question here that it's impossible for utilization to account for 255 points.  If you're maxed out currently and went to ideal, you'd then gain 255 points meaning that 2 out of 3 of your scores would be 850.

Typically as a general guideline, I always suggest that going from ideal revolving utilization to maxed out revolving utilization (or vice versa) constitutes around a 100 point variance in your FICO scores.  That being said, if you're around maxed out now, expect something in the ballpark of 100 points added to your scores if you were to take your utilization down to an idea place, say, 1%-5%.

[Thomas_Thumb]

A drop of 100 points for maxing out AG UT% with all cards high reporting balances is a good ballpark. Of course if AG UT is maxed out typically means most individual card UTs must be maxed out as well. Data suggests impact associated with these utilization factors is greater on clean scorecards than on dirty scorecards. Pasted below are a couple poster data points for reportedly clean files.

TU: 705 => 609, EQ: 719 => 634, EX: 720 => 635

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/lost-100-points-in-less-than-a-week/m-p/...

732 => 590

https://ficoforums.myfico.com/t5/Credit-Cards/I-maxed-out-all-my-credit-cards/m-p/3490565#M964636

[Carlosjb3]

Thanks for all the feedback guys. When I try out the score simulator it states that I will gain between 45-60 points if I pay off 97% of my revolving debt. I know that simulators are not accurate, however, I can't help but to wonder if the score simulater is over estimating or under estimating my potential score increase? 

[Anonymous]

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@Carlosjb3Thanks for all the feedback guys. When I try out the score simulator it states that I will gain between 45-60 points if I pay off 97% of my revolving debt. I know that simulators are not accurate, however, I can't help but to wonder if the score simulater is over estimating or under estimating my potential score increase? 

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Simulators are garbage and can't be trusted.  If your aggregate utilization is 90%-100% (which I believe was verified in your original post) and you pay off 97% of it, you'll be well within the optimal utilization range.  If that's the case, you'd gain more than 45-60 points.  As I suggested earlier, typical gain for such a move is usually around 100 points.

It's important here to clarify the language of course, as paying of 97% of your debt doesn't have to mean paying down 97% utilization. 

I could be at 2% utilization and pay off 97% of my debt, bringing me down to 1% utilization, for example.

[Thomas_Thumb]

If the OP is on a dirty scorecard, impact of utilization is given a lower signal strength than on clean scorecards. Dirty scorecards assign a large portion of scorecard points toward status of derogatory attributes. There may be a smaller upside on optimizing utilization for profiles with derogatories.

It would be nice to get before/after score data points from the OP on the drop in utilization.

[Shooting-For-800]

Utilization affects everyone differently.

I would say most would not go up or down more than 50 points even if they went from 5% utili to 95%.

I just charged $20k and my score dropped like 10 points.

[Anonymous]

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@Shooting-For-800

I would say most would not go up or down more than 50 points even if they went from 5% utili to 95%.

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I think that your prediction there is way off.  Most people see an average of 15-20 points for each threshold crossing on aggregate utilization, so when summed up that's 90-100 points right there.  Then you have to factor in highest balance card and number of cards with balances, two more factors here that when aggregate utilization is maxed out are surely at play.  100 points is about the average I've seen from reading on this forum.  Are there examples of only 50 points?  Maybe, but they'd definitely be an outlier.