How does utilization work exactly?

[Anonymous]

I'm an AU on a $9k limit card with a $0 balance. I have a $300 secured card, $200 secured card, and QS1 card for $300. That makes my available credit $9800.

Say I use $280 of my $300 card and pay $50 on it instead of PIF (because of missed work hours due to injury), will that make my score drop, even though my overall UTIL will be low? I didnt know if one card carrying a high UTIL would hurt your scores, even if your overall UTIL was extremely low.

[NRB525]

It seems likely that one card with high utilization like that would cause some score drop. However, it also would seem that there may be other negatives in your file, so that at your current score level, that card reporting a few hundred as a high utilization may not be a large loss of points.

Let us know what you see for points changes. Hopefully it's not too much.

[Anonymous]

I will do that. I may be able to get back to work and pay before the statement is cut and due anyway, so might not have anything to report.. but worst case scenario, it carries over a couple hundred balance and I'll report what happened with scores. 

[NRB525]

---

@Anonymous wrote:

I will do that. I may be able to get back to work and pay before the statement is cut and due anyway, so might not have anything to report.. but worst case scenario, it carries over a couple hundred balance and I'll report what happened with scores. 

---

This is one of the reasons we have credit. Good luck!

[yoyo]

I thought the bureaus look at the total of all cards when calulating utilazation. If your available credit is $9000 and you use less than 10% of it...sounds good to me.

[Anonymous]

They look both at individual card utilization as well as overall utilization. Both are a factor.

[RobertEG]

Fair Isaac has stated that the scoring of % util of revolving credit is based on three components.

1.  Overall % util of all combined revolving accounts

2. The individual % util of each separate revolving account, and

3.  The percent of accounts reporting a balance.

While they have not released details on the weighting of each, it is apparent from anecdotal reporting of others that overall % util is the most highly weighted, with the combined effect of individual accounts weighting second, and percent of accunts reporting a balance weighting d distant thiird.

Obviously, it does not matter in calculation of overall % util which individual cards have what balance.

However, since higher % utils have more impact on scoring than low to mid utils, maxing or near maxing of individ cards will have a proportionally greater negative impact, so it matter which account carreis what balance in producing the combined scoring of indvid accounts.

However, FICO scoring of % util is based only on the current month utilzations, not on any past, historical scoring/balances.

Thus, you should recover a high util penalty once you return the util to prior levels.

The primary risk of high utils is that it could, if maintained over a sufficient periiod, lead to a reduction of your credit limit by the creditor, thus keeping your % util high even as you pay down the balance.

[Anonymous]

Thanks RobertEG! Very informative!

[Anonymous]

---

@RobertEG wrote:

Fair Isaac has stated that the scoring of % util of revolving credit is based on three components.

1.  Overall % util of all combined revolving accounts

2. The individual % util of each separate revolving account, and

3.  The percent of accounts reporting a balance.

---

Hi Robert.  Are you sure that Fair Isaac has stated that it is the percent of accounts reporting a balance?  The only official thing I have seen is here...

http://www.myfico.com/CreditEducation/Amounts-Owed.aspx

...where the language is:

How many accounts have balances?
A larger number of accounts with amounts owed can indicate higher risk of over-extension.

On May 30th Revelate and I had a conversation (on a thread he started) where I suggested exactly what you said.  I.e. that maybe the way that FICO implemented the phrase "how many" was to look at the total number of accounts and then look at the percentage that had a positive balance, rather than just the number.  That would explain why a person with (say) 13 credit cards might not receive any penalty for having 3 showing a balance (< 25% with a balance), whereas a person with only three CCs would receive a penalty for having 2 cards (66% with a balance).  That was just a guess on my part at the time, but I will be pleased to discover that my guess was actually spot on according to something FICO has published.