How is utilization calculated?

[jamevfan]

SouthJamaica thanks for your reply, i pulled my tri when applying for a new build back in Sept. We and in the process and will hopefully be finished around Feb/March if all goes well. I was asking about utilization to determine if i need to pay down to make my middle score increase or if i will benefit for the new limits. After we close i plan on keeping walmart, macys, definitely my amazon and Victoria secret and getting rid of kays, maybe kohls, and definitely fingerhut and try to obtain at least 2 prime cards while closing my capital one secured, its a big plan and i dont know how im going to go about it with minimal impact on my score but i have time to figure that out after closing

[SouthJamaica]

---

@jamevfan wrote:
SouthJamaica thanks for your reply, i pulled my tri when applying for a new build back in Sept. We and in the process and will hopefully be finished around Feb/March if all goes well. I was asking about utilization to determine if i need to pay down to make my middle score increase or if i will benefit for the new limits. After we close i plan on keeping walmart, macys, definitely my amazon and Victoria secret and getting rid of kays, maybe kohls, and definitely fingerhut and try to obtain at least 2 prime cards while closing my capital one secured, its a big plan and i dont know how im going to go about it with minimal impact on my score but i have time to figure that out after closing

---

Overall utilization, and per-card utilization on the cards which received CLI's, will benefit from the new limits, but if I were you I would pay things down to maximize my scores prior to the closing.

[jamevfan]

Thats my goal with my highest limits at least on my QS1 card and then my Walmart card but they are not as high as they could be I hate not shopping for Christmas but it will pay off in the long run.

[Anonymous]

Listen to SouthJ.  He can help.

As I am sure he'll explain, you need to:

      create a lot of $0 balances (but leave one card reporting at least $5)

      lower the individual utilization on each card (SJ recommends < 29%)

      lower your total utilization to < 9%

That will help you maximize your score.

He may also ask you if you have an open installment loan.  If you do not, he can suggest a technique that will raise your EX mortgage score.

[jamevfan]

Thanks and that was my plan but with what we are having save and the budjet I have each pay period to pay down untilization we wont be able to pay evrything off unless we go into the saving we currently have for the house which will throw off what we are trying to save and it also seems the bureaus are at least a month behind in reporting the correct balances so if we are going to close in late feb early march I have to have this all done by Jan just to see the results and Im not sure where to start.......

[Anonymous]

OK.  You can ignore total utilization, because that will take care of itself and because you have a limited amount of money for paying down CC debt anyway.  Here would be the priorities I would recommend.

(1)  Pay off the Cap1 Secured and the Kohls completely.  This is will create two $0 balances and will also bring all your cards to under < 49%.  That will help.

(2)  Pay off as many of the little balance cards as you can.  This will create more $0 balances.

(3)  Pay down any cards that are above 29% utilization.  You may not be able to get them all paid down in time but do your best.

There are two reason to have many cards with $0 balances.

(a)  It helps your score.

(b)  When the mortgage lender calculates something called your DTI (debt to income ratio), none of those cards will have a minimum payment due.  That will lower your DTI.  DTI is not part of your FICO score but mortgage lenders care a lot about it.

PS.  As you pay off each card, be certain not to use it again until after you own your house.

[jamevfan]

Awesome! You gave me the direction needed for my cards so i will tackle those in this matter but i was thinking i needed to tackle the highest bal fist but will.pay off the cards with the lowest bal first and proceed to pay off the high card last. Great strategy and thanks for chiming in on this

[SouthJamaica]

---

@Anonymous wrote:

OK.  You can ignore total utilization, because that will take care of itself and because you have a limited amount of money for paying down CC debt anyway.  Here would be the priorities I would recommend.

(1)  Pay off the Cap1 Secured and the Kohls completely.  This is will create two $0 balances and will also bring all your cards to under < 49%.  That will help.

(2)  Pay off as many of the little balance cards as you can.  This will create more $0 balances.

(3)  Pay down any cards that are above 29% utilization.  You may not be able to get them all paid down in time but do your best.

There are two reason to have many cards with $0 balances.

(a)  It helps your score.

(b)  When the mortgage lender calculates something called your DTI (debt to income ratio), none of those cards will have a minimum payment due.  That will lower your DTI.  DTI is not part of your FICO score but mortgage lenders care a lot about it.

PS.  As you pay off each card, be certain not to use it again until after you own your house.

---

+1