How Should I approach Utilization?

[pengy_wi]

I'm trying to improve my scores through good utilization and save $$ on interest as well. 

I have 6 cards with 0 balance (mostly store cards)

1 at 32%

1 at 48% 1 at 42% 1 at 46%

and 2 at 94% (mostly due to 0% balance transfer offers)

Do I go at one of the 94% cards at a time until they are under 50% or work at getting the lower 3 under 30% to help my score? My goal is to apply for a mortgage in August.

Thanks for any input

[RobertEG]

Tough one one, since you are playing two scenarios at the same time, one a financial scenario, and one a FICO scenario. 

They are often at cross-purposes. Its hard to take advantage of both at the same time.

By doing balance transfers, the % util on the card to which the balance is transferred obviously must go up. 

That's part of the financial scenario.

Obviously, total % util will be the same, regardless of where you shift the deck chairs.  However, the higher % util cards are taking a proportionally greater hit in FICO scoring of individual account utils if you make the assumption, which I believe is true, that scoring of % util is not linear.   FICO scores overall % util as well that of individual accounts.

It's kinda hard to play both sides of the fence.  If FICO score has now become your shorter-term goal, then I would agree to put the bucks into the higher % util cards.

But that means paying less on the other cards which are apparently costing you more in interest.

Only you know the financial implications of that shift in strategy.

[Crashem]

You have a little time to play out the scenarios.  I would try and get the two below 80% as I believe that is a hurdle.  See what it looks like and hopefully that won't make that much difference in your finances.

[tcbofade]

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@pengy_wi wrote:

I'm trying to improve my scores through good utilization and save $$ on interest as well. 

Thanks for any input

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Unfortunately, as Robert stated earlier, those two goals are counter productive at the moment.

If your goal is to raise your FICO, then reduce those way to high utilization balances...

If your goal is to save dollars, leave them where they are and pay off what you can.

(If it were me, I'd save the actual dollars...)

[pengy_wi]

Update:

Forget about the interest aspect, I have gotten all card below 50% here they are:

Best Buy $555/1200 46%

Cap 1 $1350/2750 48%

Juniper $787/1600 49%

WF $1863/5750 31%

Chase $675/1500 45%

Chase $450/1000 45%

Do I work on paying off one at a time or do I bring the percentages dow together to get the best score?

[RobertEG]

FICO scores overall percent util, and the % util on each indiv account.

The exact weighting of those scoring is not known, but most seem to post that overall % util counts for more than the combined effect of the % utils on the individual accounts.

Obviously, in the scoring of overall % util, it makes no difference which accounts are paid, as the sum of overall  balances will be the same.

For individ acct scoring, experiences seem to show that the same percent reduction at a higher util will have more impact than the same % reduction at lower utils.

Stated differently, paying down higher util cards will give a higher bang because scoring of util is not linear. Reducing a 94% util by 10% is better than reducing a 40% util by the same 10%.

So I would pay down the highest % util individ cards first.  Just dont let one linger at a value substantially higher than overall % util.

[Crashem]

Are your scores in your signature FICOs or FAKOs?

[pengy_wi]

Those are my FICOs from April 2 lender pull, it's actually my DH's we're really working on

[Crashem]

First off, take a hard look at your tu report. Something is different there that is causing it to be significantly lower.than other scores. It could just be slow reporting of reported balances as tu is slow, but could be something more significant. So you need to get your middle score up to 760 to get best rate? Some lenders use 720 for best rate so you might be there already. In any case, given your situation, it is complicated and no sure answer as util part of scoring, you get dings for total utilization, invididual cards, and having number of cards with any balances. How much do you think you can pay down total before you need to get mortgage and in how long is that? Based on that answer I'll give you my best guess on where you want to out that money towards.

[pengy_wi]

We're planning to apply for an FHA loan in either July, August or September. DH's score on April 2 were 625 Equifax  668 Experian  616 Transunion (all lender pulled). They may have dropped a little due to that pull. He only needs a 620 mid if we choose to use Wells Fargo and the LO there wasn't concerned so much with what is on his reports as what his score was. We're trying to get it up higher in the next few months for piece of mind going through the mortgage process. He hasn't had any lates or collections since 2010 and we've been trying to GW things off with some success so far. It feels like the utilization is the one aspect we have the control to change at this point.

There are other cards we have with 0 balances, taking all cards into account out utilization is around 24%. We typically have about $100-300 a week for credit card payments.