Paying down individual UTIL ?

[Anonymous]

Hey guys -- I use CCT and myFico and I have to say the simulation tool is usually spot on in terms of changes -- like pay downs, lowering UTIL, and paying on time. However I don't think it accounts for individual pay downs ?

For example, right now my total UTIL is 30% and it says if I pay down $3000 I will see a 10 point bump to 711. However one of my cards now is at 40% and just paid it down to 16% -- wouldn't this cause a bump ? I don't think the simulator accounts for this type of UTIL pay down -- only overall. Another card is over 50% and will report at 20% soon as well.

Should I expect a bump with these cards going well below 30%? The simulator has me pretty stagnant right now -- showing no increase by paying on time now until 12 months ! Like I said, the simulators have been 90% correct on guesstimating scores -- what do you think on this ?

I'm hoping for a bump with lowering these cards below 30%.

[Anonymous]

Great questions, JZ!

The simple answer is that FICO cares a lot about individual utilization... but only when a card begins to get somewhat close to being maxxed out.  Here's an example -- nobody really knows where the breakpoints might be, and they could vary depending on the kind of profile you have (dirty, thin, young, etc.).  So I am making these numbers up.  But here's a reasonable guess that might apply to many people:

< 50% = no score hit of any kind

50-70% = slight score hit

70-85% = visible hit but still not that much

85-95% = pretty significant hit

96+ = big hit

Thus I would be very surprised if going from 40% to 16% on a particular card gave you even one extra point (assuming no change in total utilization).  Of course if paying down that card caused your total U to go down, then you might well get some help, but it would be because of the change in total, not individual U.

PS.  For what it is worth, I think there is a huge amount to be said for paying off all your cards.  Completely.  Not paying them down, but off.  It will help your score but it will also help you in other much more important ways.

[Anonymous]

I love this reply. However I just respectfully disagree with some points. First off, most will agree that you WILL see a score drop (albeit small to moserate) as soon as a card goes over 30% UTIL. I've seen this myself -- when my FCU VISA went from 20% to 38% the next month, my score took a 7 point hit. Nothing else changed - the score dropped the night the new balance reported. The next month it went to 0%, and I saw a 11 point gain the same night it reported.

I think once you go past 30% on any one card scores will be affected, even if minuscule. Then past 50% is moderate, 75% moderately large and 90% can be quite a large drop. 90 is considered maxed out in FICO.

I will report back once these cards individual UTIL is paid down soon

[Anonymous]

:-) *

[Thomas_Thumb]

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@Anonymous wrote:
I love this reply. However I just respectfully disagree with some points. First off, most will agree that you WILL see a score drop (albeit small to moserate) as soon as a card goes over 30% UTIL. I've seen this myself -- when my FCU VISA went from 20% to 38% the next month, my score took a 7 point hit. Nothing else changed - the score dropped the night the new balance reported. The next month it went to 0%, and I saw a 11 point gain the same night it reported.

I think once you go past 30% on any one card scores will be affected, even if minuscule. Then past 50% is moderate, 75% moderately large and 90% can be quite a large drop. 90 is considered maxed out in FICO.

I will report back once these cards individual UTIL is paid down soon

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Again, impact is profile dependent. Many posters report seeing a score increase going from above 50% UT on a card to below 50%. The big hit comes when you go into max out territory which is around 85% to 90%.

I let a "relatively low" limit card report a utilization of 51% and a couple months later of 80% with no change in Fico 8 score. In both cases, aggregate (overall) utilization across all cards was maintained under 4%.

Aggregate utilization influences score much more strongly than does utilization on an individual card - unless the card gets to max out territory. It is likely you will feel some real pain when aggregate UT goes above 30%.

For those that have a long credit history with 5 or more active cards and no late payments, utilization in the 30% to 50% range on a specific card typically won't shift score much. - unless, the high utilization is maintained. [shift less than 10 points is a norm]

A reasonable general guideline (from a score perspective) is: Keep aggregate utilization under 9% and don't exceed 30% on a per card basis for any card.

However, if someone wants to take advantage of a 0% APR promotion, they can likely take the card up to 75% UT as long as AG UT is maintained under 30% without suffering a severe drop in score. [severe meaning more than 25 points]

Example: Both posters reported an AG UT of under 9% the prior month. Now..

1) Poster A has 3 credit cards, total $6k credit line

2) Poster B has 6 credit cards, total $60k credit line

Each poster allow a card with a $4k credit line to report $3k in charges.(75% card utilization). All other cards report $0.

Poster A has an aggregate UT of 50%. Score drops 30 points due to high AG UT% not because card UT is 75%)

Poster B has an AG UT of 5%. No score change even though card UT is 75%.

[Anonymous]

Thanks for the thoughtful reply, JZ.   Really appreciate it.

The only real way to test this kind of thing is when you change your individual U but keep your total U exactly the same.  (Or if your total U stays in the same extremely low range, like 1-5%).  Otherwise, if your total U changes, then all bets are off -- you can't conclude that the score change is resulting from the individual U changing because it just as well be the total U.

So, for example, when your FCU VISA went from 20% to 38% and you had a score increase, it's possible that was because your total U also went up.

It's generally hard for me to test this particular scoring factor (individual U) because all of my individual CLs are way higher than I would ever want to spend, so I'd have to buy a lot of stuff I don't want some month.  And much as I am willing to do for science, that I am not willing to do.  If I had one card with a small CL, that would be perfect for this -- but I don't.

You're right that I am in general doubtful about the effect of IU changes below 50% (taken by themselves, with total U staying fixed).  It doesn't surprise me that FICO would run it that way.  Here's an example.  Suppose a guy has four credit cards (Discover, Amex, VISA, MC) with CLs 1k, 2k, 3k, and 4k.  All of his cards except the Discover are at $0.  This month his Discover is at $150.  Next month it is at $450.  From FICO's perspective, his risk is still basically the same.  He went from 1.5% total U to 4.5%.  The fact that he went up to 45% on the Discover will probably not matter to FICO.  He's still very far from maxxing out his card and his general debt is still incredibly low.  He's going to have to really raise his Discover balance to attract FICO's attention.

But of course, maybe the bar is set a lot lower than me and the people I know on here guess.  So you could be right.

What is certain, however, and what I just want to be the biggest encourager of you in, is that paying off your CC debt is a really good thing.  So the fact that you are doing that will ONLY help you.  There's a lot of ways it will help you besides your score too (and these are more important than your score, IMO).  But it will certainly help your score, notably by bringing your utilization way down and by creating a bunch of $0 balance cards. 

Thanks again for your thoughts!

[NRB525]

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@Anonymous wrote:

The only real way to test this kind of thing is when you change your individual U but keep your total U exactly the same.  (Or if your total U stays in the same extremely low range, like 1-5%).  Otherwise, if your total U changes, then all bets are off -- you can't conclude that the score change is resulting from the individual U changing because it just as well be the total U.

It's generally hard for me to test this particular scoring factor (individual U) because all of my individual CLs are way higher than I would ever want to spend, so I'd have to buy a lot of stuff I don't want some month.  And much as I am willing to do for science, that I am not willing to do.  If I had one card with a small CL, that would be perfect for this -- but I don't.

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This is one reason I'm glad that I have two secured cards for $500  each Getting them to move past the various thresholds like 50% is a piece of cake with a BT offer.

FWIW, I seem to see some score changes at 50% so far, not noticed at 30%, and seeing some at 10% as well, on individual cards.

[masscredit]

I'm going to be playing with this a little this month. Last month I let 7 of my 8 cards post a balances (http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Letting-accounts-report-balances-my-resul... Now it's time to pay them down. But... I will be keeping balances on my Barclay cards to take advantage of 0% offers. One will be about $700/$4400 (15%) and the other will be $5795/$10,500 (55%). Total utilization will be 12%.  I think I'll gain a few points back by paying off the other cards and only having 2 report but some of those points might be erased because one card will be reporting over 50%.  I'll see in a few weeks.

My Barclay Rewards card is due for a CLI. I'm going to contact them about that next week. A 30% increase would keep my utilization under 50%.