Fico utilization question - Percentages

[BobbyJ]

I am getting ready to buy a new car in less than 3 weeks and wanted to know if it was better for fico scoring to have 2 credit cards listed with 35% and 56% utilization or having 3 cards reporting with 21%, 25% and 35% of balances reporting?

Thanks in advance

[Anonymous]

I don't think you can calculate like that. Each card has a different credit limit. 

Just add up all your balance and divide it by your total credit limit. 

Example 35% of 1000 is different from 35% of $20,000. 

Anyways. Pay all your balance. Keep it under 2%. Get a used car. 

[Anonymous]

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@BobbyJ wrote:

I am getting ready to buy a new car in less than 3 weeks and wanted to know if it was better for fico scoring to have 2 credit cards listed with 35% and 56% utilization or having 3 cards reporting with 21%, 25% and 35% of balances reporting?

Thanks in advance

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It will be easier for folks to answer you if you can confirm....

     (1) You have exactly six open credit cards.

     (2) In the scenario where two show a balance, you plan to have four reporting $0.

     (3) In the scenario where three show a balance, you plan to have three reporting $0.

     (4) In either scenario, you plan for your total utilization to be the same.

Is that right?

If so, I am not sure which would better.  In the Two Showing scenario one is > 50% of its credit limit, which might cause a score drop; but it does have more cards with a $0 balance, which is good.  In the Three Showing scenario, all cards are at < 49%, which is good; but you do have fewer cards with a $0 balance, which is not as good.

If you could combine the two approaches, where you had exactly two cards at < 49%, that would be best.

Bear in mind that given your timeframe, none of this may be possible.  It often takes a while to get CC accounts to update at the CRAs.

Do you have any open installment loans?  (Car loan, student loan, mortgage loan, personal loan?)

[BobbyJ]

Hello,

Let me clarify.  Want to know whether it is best to split the balance on the Logix FC MC to another card to reduce the 56% utilization rate and will that improve the score or not?

Logix FCU MC  Bal $5223  CL $12,000

Cap 1 QS Visa Sig   Bal $0   CL $10,000

Cap 1  QS World MC  Bal $0   CL $10,000

Cap 1 Venture Visa Sig  Bal $0   CL $10,000

Penfed Plat Rewards Visa Sig  Bal $3,387   CL $9,500

Fort Knox Plat Visa  Bal $0   CL $5,000

San Diego County Credit Union Visa  Bal $0  CL $2,500

Barclays Rewards MC  Bal $0   CL $1,500

Best Buy Visa  Bal $0   CL $1,000

Target Red Card  Bal $0   CL $800

Macys  Bal $0  CL $800

Sams Club Store Card  Bal $0   CL $437.00

Walmart Store Card  Bal $0   CL $2,000

HSN Store Card  Bal $0  CL $3,000

Lowes Store Card   Bal $0   CL $7,000

JCPenny Store Card Bal $0   CL $1,800

Logix FCU Auto Loan - Bal $ 19,503.00 - Soon to be paid a 100% by VW due to the Diesel Lawsuit that was approved today.  Need to buy another car in the near future.

[Anonymous]

Your signature states that only six cards survived a bankruptcy filing.  I assumed that this meant you had exactly six open cards and that the rest were closed.  Is that not the case?

Knowing how many open credit cards you currently have is important to answering your question.  Is it six?  Or far more than that?

Is it possible to pay off most of the Logix auto loan but still keep it open?  If so, that will benefit you far more than paying it off altogether.

Or is it the case that the terms of the BK require you to pay off the loan -- no way to keep it open?

[BobbyJ]

Hi,

My bankruptcy was discharged in January 2014.  Some of the cards in my signature survived because they had zero balances at the time.  All other cards were opened within the last 2 3/4 years.

VW is going to pay the auto loan off in full shortly.  This is part of the settlement for the buyback of us owners who opted not to have VW fix the cars if they can. The buyback should be complete within the next 2 weeks.

Thanks

[Anonymous]

That clears things up a good deal.

There are basically three factors in play here:

      (1)  Total utilization

      (2)  Individual utilization

      (3)  Percentage of open credit cards showing a positive balance

(1) is being held constant in both proposed scenarios.

(3) turns out to being maximized on both scenarios, even though the the percentage is slightly different.  This is because both involve the percentage being < 25%.  I don't think anyone knows for certain where the cutoff is for optimal value but the lowest it would be is 25%.

Thus there cannot be any scoring harm in spilitting your big card onto two others, resulting in three cards each under 38%.  There might be a financial drawback if it costs you a BT fee, but no scoring drawback.

But will there be a scoring advantage?  Nobody knows for sure.  Some people attest that there is some advantage in going from 52% to 48%.  (Thus a conjectured breakpoint at 48.99%)  Other people have tried duplicating that by keeping total U constant and then allowing a card to go from 40% to 55% -- but these people report no score change at all.  So the testimony is mixed.

Here is some advice that is certain, however.

If you will add a small $500 Share Secure personal loan (recommended lender is Alliant) to your profile as soon as possible, and immediately pay most of it off, then when your current Logix auto loan gets paid off, you will get a big scoring boost.  (The scoring benefit will materialize when your reports show both the mostly paid-off Alliant loan and the fully paid off Logix loan.)

This will help you far more than gamesmanship with your current 55% utilized CC.

Here is step by step guidance that explains the theory and practice behind the Share Secure loan technique.  It gives a big boost to anyone with no open installment loans -- which is where you will be once the Logix loan gets paid off.  You should get started on the SS loan now, however, so that it is in place when the other loan gets paid off.

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

[BobbyJ]

Thank you so much.

I do have an open student loan for 8K from over 20 years ago that I am still paying off.  I have a $500 LOC from Penfed that I have never used.

[Anonymous]

Arggggghh!  This is why I asked you if you had any open installment loans.  When you told me that you did and named the Auto loan, I assumed that this meant and this is my only installment loan.  I suppose I should have posted one more time and asked you if that was your only ONLY installment loan.

I am unsure what the original amount of your student loan was and of that how much you currently owe.  Either the original amount was 8k or you current owe 8k.  If you can get your total installment utilization down to < 9% that should give you a score boost too.  I don't know whether that is easily doable.  Installment utilization is explained in that link I sent you.

Best of luck....

[BobbyJ]

Thanks again for all of your advice.  I will take it to heart.

Have a good one!!!!