@Elizabeth_FICO wrote:Hello everyone! If there's a new blog article that I think you guys might like I plan on posting it in the Forums.
This week's article is: What Should My Credit Utilization Ratio Be?
Let me know what you think about the article.
For more content don't forget to check out our blog.
Thanks Elizabeth. This article supports what I have been saying for awhile, which is that there are no known magic thresholds for aggregate revolving utilization, and the 30% threshold which is often bandied about is a myth.
Yes, a good outline of utilization knowledge.
While there are no hard tiers for utilization where FICO scores make a step change, there are significant gains in score to be had by lowering utilization from very high levels.
"However, the data doesn't support the implication that your credit score will dip once your utilization ratio crosses the 30% threshold." Actually, the score will be dipping as utilization moves through and beyond 30%.
The 30% recommendation has merit, because people need a useful target to aim for. If someone is at 80% to 90% on one or more cards ( younger me ) then setting a goal of 2% utilization for those cards is going to seem impossible. Target 30%, and the cardholder has a more realistic chance of getting there, and will see significant improvement in scores along the way. Manual review of cards also needs to be considered, for mortgage or auto loans, and 30% looks better than maxed out for those applications as well.
@NRB525 wrote:Yes, a good outline of utilization knowledge.
While there are no hard tiers for utilization where FICO scores make a step change, there are significant gains in score to be had by lowering utilization from very high levels.
"However, the data doesn't support the implication that your credit score will dip once your utilization ratio crosses the 30% threshold." Actually, the score will be dipping as utilization moves through and beyond 30%.
The 30% recommendation has merit, because people need a useful target to aim for. If someone is at 80% to 90% on one or more cards ( younger me ) then setting a goal of 2% utilization for those cards is going to seem impossible. Target 30%, and the cardholder has a more realistic chance of getting there, and will see significant improvement in scores along the way. Manual review of cards also needs to be considered, for mortgage or auto loans, and 30% looks better than maxed out for those applications as well.
When I'm at 30% I'm losing about 90 points in my FICO 8, so I personally don't find that to be a very good target at which to aim.
Good article by Ben Luthi. Utilization is like the extra credit to on-time payments. It's consistency and/or stabilization at or below 30% over a period of time, is key to obtaining an optimized credit score.
@sznthescore wrote:Good article by Ben Luthi. Utilization like the is the extra credit to on-time payments. It's consistency and/or stabilization at or below 30% over a period of time, is key to obtaining an optimized credit score.
The article does not say that; it says the opposite. It says that the 30% guideline is NOT meaningful.
@SouthJamaica wrote:
@sznthescore wrote:Good article by Ben Luthi. Utilization like the is the extra credit to on-time payments. It's consistency and/or stabilization at or below 30% over a period of time, is key to obtaining an optimized credit score.
The article does not say that; it says the opposite. It says that the 30% guideline is NOT meaningful.
I think @Elizabeth_FICO asked what did I/We think about the article NOT what it said. @NRB525 basically summed it all up as everyones profile data my react differently to certain utilization thresholds. No where in the article did I see that the 30% guideline is NOT meaningful. Bottom line.... the lower the utilization the better. Consistently and over a period of time as I previously stated.
@SouthJamaica wrote:
@NRB525 wrote:Yes, a good outline of utilization knowledge.
While there are no hard tiers for utilization where FICO scores make a step change, there are significant gains in score to be had by lowering utilization from very high levels.
"However, the data doesn't support the implication that your credit score will dip once your utilization ratio crosses the 30% threshold." Actually, the score will be dipping as utilization moves through and beyond 30%.
The 30% recommendation has merit, because people need a useful target to aim for. If someone is at 80% to 90% on one or more cards ( younger me ) then setting a goal of 2% utilization for those cards is going to seem impossible. Target 30%, and the cardholder has a more realistic chance of getting there, and will see significant improvement in scores along the way. Manual review of cards also needs to be considered, for mortgage or auto loans, and 30% looks better than maxed out for those applications as well.
When I'm at 30% I'm losing about 90 points in my FICO 8, so I personally don't find that to be a very good target at which to aim.
Are you consistently below 30% individual card utilization?
The context of my point was if someone is at 80% to 90% individual utilization on potentially multiple cards.
If one or more cards are at 80%, what is the effect on your FICO 8?
@NRB525 wrote:
@SouthJamaica wrote:
@NRB525 wrote:Yes, a good outline of utilization knowledge.
While there are no hard tiers for utilization where FICO scores make a step change, there are significant gains in score to be had by lowering utilization from very high levels.
"However, the data doesn't support the implication that your credit score will dip once your utilization ratio crosses the 30% threshold." Actually, the score will be dipping as utilization moves through and beyond 30%.
The 30% recommendation has merit, because people need a useful target to aim for. If someone is at 80% to 90% on one or more cards ( younger me ) then setting a goal of 2% utilization for those cards is going to seem impossible. Target 30%, and the cardholder has a more realistic chance of getting there, and will see significant improvement in scores along the way. Manual review of cards also needs to be considered, for mortgage or auto loans, and 30% looks better than maxed out for those applications as well.
When I'm at 30% I'm losing about 90 points in my FICO 8, so I personally don't find that to be a very good target at which to aim.
Are you consistently below 30% individual card utilization?
The context of my point was if someone is at 80% to 90% individual utilization on potentially multiple cards.If one or more cards are at 80%, what is the effect on your FICO 8?
You're talking about oranges (aggregate revolving utilization) and apples (individual account utilization).
Below 30% is a significant threshold in individual utilization, but of no special significance in aggregate utilization.
@sznthescore wrote:
@SouthJamaica wrote:
@sznthescore wrote:Good article by Ben Luthi. Utilization like the is the extra credit to on-time payments. It's consistency and/or stabilization at or below 30% over a period of time, is key to obtaining an optimized credit score.
The article does not say that; it says the opposite. It says that the 30% guideline is NOT meaningful.
I think @Elizabeth_FICO asked what did I/We think about the article NOT what it said. @NRB525 basically summed it all up as everyones profile data my react differently to certain utilization thresholds. No where in the article did I see that the 30% guideline is NOT meaningful. Bottom line.... the lower the utilization the better. Consistently and over a period of time as I previously stated.
He said "Some financial experts recommend keeping your credit utilization ratio below 30%. However, the data doesn't support the implication that your credit score will dip once your utilization ratio crosses the 30% threshold."