Newbie Question - Improving Utilization Ratios by splitting credit card usage?

[Anonymous]

Hello, new to the forum and loving the great information here! Here's my question, please let me know if more info is needed or this has been covered, I haven't found a direct answer through search.

Recently paid off a joint 5 year auto-loan, so my score has been dropping every month since. (Based on the number provided via my Discover account and Citi account - even if not "real" I assume the real FICO is dropping as well.) So in looking at my current credit environment, I realize that the ratios are probably what is dinging me and I have an idea about how to help offset that, wanted to run it by the forum to see if it makes sense.

I always pay all my credit cards off every month, but there is one I use for my sole proprietership business (so it's a personal card) that gets heavy use every month, though still paid in full. While the credit limit is high, the use is also high (limit is like $13k+ but it reports at least $5k every month.) I also have a joint HELOC, which we recently took more $ out so that ratio has increased as well. (I think we are at about 29% on that.)

I have other credit cards that I don't use very much, that have pretty high limits. Here is my thought: what if I added one of these other under-utilized cards to my "business" use, thereby splitting usage between two high limit cards instead of one? So, instead of using one card at like, 40%, I would use two cards at closer to 20%? So, I realize that this only changes the utilization on each account, not the overall utilization. Is that not enough to make a difference? Am I totally wasting my time with this train of thought? If so, should I consider moving a portion of my business expenditures to check payments to relieve the ratios? I just use the card because I like to get airline miles :-)

While my estimated score is still quite good, it is nowhere near the excellent score I had just before paying off the auto loan, which I understand to be normal. But I would hate to think it is going to continue to drop 10-20 points a month! (Which it has done since May.) Nothing else has changed in my credit environment other than the completed auto loan and a slight boost to the usage of the HELOC. If there are other thoguhts someone has or I am missing something, I'd love to get your feedback. I did just pull all my reports to check to make sure nothing else was going on, everything looks as it should be.

I guess now that I don't have an auto-loan I need to determine what else I can be doing to maintain or increase my score moving forward. Continuing to research this site for ideas...

Thanks!

[Anonymous]

1. Dropping individual UTI from 40% to 20% crosses over the last threshold of 28.9%, probably worth about 10-15 points. That said, if rewards is what you're after and business cash flow isn't a problem, you can just pay the balance down below 28.9% before statement cut to achieve the same goal.

2. This is why one should have business cards for business expenses because most do not report to your personal profile, TD and CapOne being a few known exceptions. If your profile and score supports it, I would suggest looking into applying for a business card.

[Anonymous]

Thank you for the advice - I meant to ask about paying some of the balance off before the end of statement, that makes total sense. I did not know that business credit cards don't generally report, that is great to know. I will definitely check into that.

[Anonymous]

No problem, good luck.

[Anonymous]

Thought I would just post a follow-up - I split my credit card purchases last month among two high limit cards instead of concentrating purchases all on one card. I don't know if it is just an anomoly, but my FICO as reported by my Citicard and Discover Card accounts went up 22 and 29 points, respectively! After a steady drop each month since May, I was surprised to see such a quick rebound. Nothing else has changed in my average monthly use of credit/loans, etc., and again this is only in the first month since starting my experiment. Now maybe tihs won't last  - but I look forward to continuing the test.

I thought that was interesting enough to report to the group. We will see if it levels back out now that is up over 800 again. I'd certainly like to keep it there, I thought perhaps now that my auto loan is closed out, I would not get back up that high. For now, numbers are improving and all I did was use an additional card for about half my credit purchases. Easy enough for now... maybe this will help someone else in the same boat. I know I don't use some of cards at all anymore, so I will try to put them into rotation moving forward.