Median score

[vanillabean]

Let's say we have this young person, who got her first credit card in June of 2009. It doesn't report a credit limit for util, the high balance is $1,000, and the current monthly balance is $10. In June of this year was added a second card, whose credit limit of $500 is used for util. Which monthly balance do you think she should aim for to stay at the median EQ FICO score?

[Anonymous]

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@Anonymous-own-fico wrote:

Let's say we have this young person, who got her first credit card in June of 2009. It doesn't report a credit limit for util, the high balance is $1,000, and the current monthly balance is $10. As I understand it, this card is not reporting a credit limit. Correct? If not reporting a credit limit, the formula uses the highest balance as the credit limit. If highest balance was $ 1,000, it would be used as credit limit. Current balance of $ 10 would be 1% of the $ 1,000. .

 In June of this year was added a second card, whose credit limit of $500 is used for util. Which monthly balance do you think she should aim for to stay at the median EQ FICO score? Now she has added a second card with credit limit $500. If we add the $1000 from the first card,  this makes $1,500 available so credit utilization of $ 10.00 is now 0.67% utilization. 

I'm not going to address the question about  a goal for median score...  It seems to me that there are too many factors beyond card balances which effect the scores... average age of accounts, etc. Since this is a "young person", are there any accounts reporting prior to June 2009?   It would make a big difference whether her history is 14 months, or 3 years or 5 years or whatever....

From things I have read, it will also make a difference as each card reaches it's 2 year "birthday".

I did want to share something else for your consideration... I have read discussions relating to situations like the first card. Since credit limit is not reported, some people would charge the card close to the credit available in order to increase the high balance which is reported....  After the person knows that the new high balance has been reported to the credit bureaus, they pay the card back down. The philosophy is that the person takes a short term hit for a long term gain.  I am not recommending it... but, if it were my card, I'd think about it... 

[vanillabean]

Many thanks to GypsyGal for her take on it. Other comments are appreciated as well. The specific situation is hypothetical of course, about my imaginary niece Veronica with dreamy blue eyes.  But it touches on a number of real aspects in everyday credit card life that are best thought of well before crossing the bridge.

[MarineVietVet]

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@Anonymous-own-fico wrote:

Let's say we have this young person, who got her first credit card in June of 2009. It doesn't report a credit limit for util, the high balance is $1,000, and the current monthly balance is $10. In June of this year was added a second card, whose credit limit of $500 is used for util. Which monthly balance do you think she should aim for to stay at the median EQ FICO score?

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My advice would be the same as I usually give. I would try and make sure the card with the $500 limit reports less than 9% utilization each month and the other card always reports a zero balance. If she does this month after month she'll do just fine IMO.

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772
You can do the same thing with hard work

[Anonymous]

Are you recommending that I should only use 10% of my total credit or 10% of each credit card?

[MarineVietVet]

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@Anonymous wrote:

Are you recommending that I should only use 10% of my total credit or 10% of each credit card?

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FICO actually scores both of those things. But what I was talking about is for maximum tweaking of a score for those trying to repair and rebuild or perhaps for others trying to get every last point possible before applying for new credit. You can hopefully reach a point in your credit journey where a few points here and there don't mean as much and this strategy can be modified.

Let only one of your cards report a balance of <9% on the monthly statement and then pay in full before the due date to avoid interest. On all other cards let them always report a zero balance each month. That doesn't mean you can't use them and you should to show activity but pay these other cards in full a few days before the statements posts to ensure zero balances.

Doing all this is not always possible each and every month because life throws us surprises but try to stick to this plan as much as possible.

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772
You can do the same thing with hard work

[vanillabean]

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@MarineVietVet wrote:

My advice would be the same as I usually give. I would try and make sure the card with the $500 limit reports less than 9% utilization each month and the other card always reports a zero balance. If she does this month after month she'll do just fine IMO.

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I fully agree, but she doesn't listen. The young woman has made up her mind that the median score of say 720 is the initial baseline, against which a given monthly balance is to be measured

I can sort of see her point, because if she can get away with a util of little more than 30% on the secord card and her score at the same time is still above the median score, then she can claim that by being below the median score you have done something that's bad.

I find it hard to argue with her logic, although some day of course I hope she'll move on and follow your advice.

[MarineVietVet]

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@Anonymous-own-fico wrote:

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I fully agree, but she doesn't listen. The young woman has made up her mind that the median score of say 720 is the initial baseline, against which a given monthly balance is to be measured

I can sort of see her point, because if she can get away with a util of little more than 30% on the secord card and her score at the same time is still above the median score, then she can claim that by being below the median score you have done something that's bad.

I find it hard to argue with her logic, although some day of course I hope she'll move on and follow your advice.

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All you can do is give your opinion and then step out of the way. 

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772
You can do the same thing with hard work