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How much does OTL account affect credit score

New Visitor

How much does OTL account affect credit score

I'll be applying for a student loan through a private lender who only looks at Equifax. However, I'm worried that my credit score will be lower because one of my two credit card accounts is over the limit (OTL). Although I have made all minimum payments, I'm worried about utilization. 


Credit card 1: 20% used

Credit card 2: 110% used


As of today I have enough cash to bring one of the accounts down by 10% and I was wondering which one is best to pay off first? Any other tips would be much appreciated.


Message 1 of 3
Moderator Emeritus

Re: How much does OTL account affect credit score

Anythibg 90% or higher util on a card is considered maxed out.  You need to pay that util down quickly.  Be careful that you don't get balance chased as you pay it down, that will sometimes happen when you max and carry a balance.

Starting Score: 504
July 2013 score:
EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+
Take the myFICO Fitness Challenge

Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!

June 2017 update: All scores over 820, just pure gardening now.
Message 2 of 3
Community Leader
Legendary Contributor

Re: How much does OTL account affect credit score

It appears as if the scoring of % util in FICO is not linear.  In English, that means that the same % increase from, say 80% to 90%, hurts more than the same 10% increase from, say 10% to 20%. 

Additionally, FICO scores both overall % util and the util of each card.  While the distribution amongst cards is averaged out in overall % util, that is not the case when looking at individ % util.  If you accept the premise that higher utils have proportionally more negative impact than the same interval at lower utils, the effect can be significant.

Thus, purely from a FICO perspective, one would concentrate on the highest % util cards.


However, from a financial perspective, paying down the highest APR cards would reap result of less $$ out of pocket.  Thus, two often-conflicting strategies.

Advice on which to pay first is dependent upon your individual need.... improve FICO score, or decrease interest expenditure.


That is apart from any manual review issues.  Creditors dont usually base their decisions only on a three digit number.  While paying down a high util card will remove the negative effect next month, balance history is also recorded in consumer files, and is available to creditors.   Seeing a lengthy period of very high balances vs CL may raise some concern.  And, of course, creditor keep their own history data, and extended periods of high util may trigger review of your current credit limit.

Message 3 of 3