Multiple balances reporting

[red259]

I know the conventional wisdom is that you want only one card showing a balance if you want to go for the best possible credit score. My question is this. If you have statement cuts with balances on more than one card  but in small amounts does it matter for scoring purposes if you have two cards showing balances vs 3 or 4 cards showing balances assuming that the credit utilization is exactly the same in each scenario? 

[Anonymous]

Yes.

There are three factors associated with CC balances:

     (a) Total utilization

     (b) Individual or "per-card" utilization

     (c) Number of cards with a positive balance

All three are considered.  Thus, suppose Bob and Charlie each have 5 cards (2k each) with a 10k total credit limit.  Their credit profiles are otherwise identical (age, etc.). Suppose their total U is exactly 3% for both of them ($300).  If Bob has the $300 on one card and Charlie has it spread out over five cards, Charlie will have a lower score, because he will receive a penalty due to (c).

It's not entirely clear how FICO goes about computing (c).  There's some evidence that it goes in part by the percentage of open cards showing a balance.  Thus if Fred and Dave each have 3 cards showing a balance, but Fred has only cards 3 total and Dave has 13, it's certain that Fred will get a penalty and quite possible that Dave will get no penalty.  It's also possible that FICO considers not just the total number of cards showing a balance, but accounts showing a balance.  So if one guy has several open loans, that will also be a lot of accounts showing a balance.

Without a doubt, however, you can't lose by paying down all your cards to $0 except one (with the remaining card showing a small positive balance) -- any time that you are trying to squeeze every extra point out of your score.

Bear in mind that most people don't need to have an absolutely perfectly maximized score at all times.   Therefore most of us can and should feel free to allow multiple cards report and not worry too much about utilization, as long as the amount reporting is reasonably low (e.g. < 50%).  Because whenever you do need to get all the extra points from a low U, you can get those in a month by just paying down your cards so that the reporting values are mostly zero.

[NRB525]

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@red259 wrote:

I know the conventional wisdom is that you want only one card showing a balance if you want to go for the best possible credit score. My question is this. If you have statement cuts with balances on more than one card  but in small amounts does it matter for scoring purposes if you have two cards showing balances vs 3 or 4 cards showing balances assuming that the credit utilization is exactly the same in each scenario? 

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So, expanding on CGiD's comment, how many other CC do you have? What is the percent of cards with a balance if 3 or 4 have small balances?