Question about % utilization on credit cards.

[Anonymous]

Hey HigginsTheButler.  (BTW, kudos on choosing a most excellent screenname.)

You are in great shape, as far as the specific CC questions you originally asked about.  You have plenty of cards, most have a balance of zero, a couple report a positive balance < 9% of the credit limit, and that amount you pay in full. 

After the first couple posts on this thread, you can ignore most of the discussion that followed, unless you just personally find it interesting.  It had to do with an issue that, if it exists at all, could only affect you by a fraction of a point.  Assume for now that the issue under discussion (having a large dollar value reported on non-mortgage accounts) is a complete nonissue for everyone.  It's something that Revelate and I might look into further on our own, but assume it doesn't affect you.

If you drop that tiny little clause (about size of the dollar value) did the rest of my initial response make sense to you?  The most important thing was the difference between Long-Term Strategy (regarding your CCs) and the Optimizing Strategy.  Most months all you need to do is think long term: set up auto pay to make sure you never miss a payment, pay in full so you don't pay interest, and make sure none of your CCs come even close to being maxed out.  Then in the rare stuations where you need for a couple months to eke out every possible point, use the Optimizing Strategy  The reason that the easy Long-Term approach works is that FICO has no memory when it comes to utilization; it's ok to have a month where a few cards go to 50%; FICO will forget that once you pay it off.

One final thought:

I am sure that you would like to see your scores increase over time (12 months ago you were in the mid 600s). So a quick observation from me is that right now you have plenty of CCs.  You have gonzo plenty.  My understanding is that current FICO models don't penalize a person for having lots of CCs (as a number in of itself) but once you have as many as you do now, you won't gain any further FICO benefit from adding more.   And indeed every time you add one more, you take a hit in a few different ways.  So at this juncture you probably just want to do the standard things: allow your accounts to age, allow any negatives if they exist to drop off, keep paying your bills on time, keep your CC's open by making a small charge every now and then, and pay your CCs in full.  If you do not have any installment loan history, you might want to look into a credit builder loan to help you at some point.

[Anonymous]

Thanks I really appreciate the lengthy and thorough response. It all makes great sense to me at this point.

thanks again

[Anonymous]

You are very welcome.  Best wishes...

[Anonymous]

Hi Revelate.  Early in our discussion, I mentioned that there were at least a few places in the myFICO forums where the claim you found controversial was discussed: namely that amounts owed, independent of % utilization, are considered by FICO in their scoring models. 

At the end you asked me to let you know if I could find them.  Here are two links.

Jello77 emphatically asserts that amounts owed matters:
http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/What-s-a-good-utilization/m-p/1229823/hig...

Jello77 then references a deeper discussion:
http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/VERY-interesting-info-about-FICO-score-po...

Best wishes....

[Revelate]

I can't see the chart but the verbiage doesn't match my own testing.  $45 or $684 produce the same FICO 8 score for me, and I once had a tradeline increase it's balance over 4000 (from a double-digit balance to start) and neither my FICO 8 nor FICO 04's moved.  My limits are frankly pretty pathetic compared to most people's so it's not like I have a quarter of a million in available credit like some members here to where it's all irrelevant.

Also if you read the thread, MVV does state it absolutely correctly: the information FICO gives out is not the real deal regarding the algorithm.'

Jello / you may be right, but I will reserve judgement until I can see some better data or if I get some of my own in the semi-near future.  I find it a little suspect though and wouldn't be stating it as gospel even if I could get something concrete.  Dubious to say the least based on my and other's experiences as stated.

[Anonymous]

Hi Revelate.  Nice to hear from  you!  Hope you are having a good week.

I realize that you (and MVV) have used the argument before: Becaue the exact and true details of its algorithms are hidden by FICO, therefore no one can make any claims about them whatsoever.  But that argument surely seems (at least to me) flawed. 

For example, the exact thresholds for the factor "credit card ultilization" are hidden by FICO, and likely vary depending on the scorecard one is in and the particular flavor of FICO the creditor is using (Equifax FICO 04, FICO 08, FICO 08 Auto, etc.).  If FICO were ever to do a presentation at a conference on CCU, using example data, the data they would use would be fabricated and carefully designed to illustrate the general principle, without revealing precisely how the factor of CCU works and without using true client records (even if de-identified).  Furthermore, if you asked FICO later about the presentation, they would of course agree that the data they used (and thresholds given) were in that sense fictitious.  It would not, however, therefore follow that CCU is not a factor in FICO's algorithms, nor would one be wrong in concluding that the general principle of "low CCU is better  than high" is not applicable across most scorecards and most FICO versions.  The presentation was designed in fact to reveal those general claims and principles; that was the whole point.

Exactly what the current thresholds are today (in 2015) no doubt varies enormously between the scorecards and the various versions of FICO.  This would be true for pretty much any factor one could name: whether it is the amount owed, the credit card utilization, etc. It's entirely possible that in certain scorecards, today's "amount owed" thresholds might be huge.  I.e. in might be that we don't begin to see a hit in some cases until the amounts owed become greater than $5000.  That begins to fall into the realm of the details of the models, which I for one have always agreed are hidden. 

The reasons I have for thinking that  "amounts owed" is in fact a factor is because it seems as though FICO says it is.  There's a number of reasons why I'd think that, which we can talk about more if you like at some point. 

Very best wishes and I hope you have a good weekend.

[vanillabean]

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@iv wrote:

For what it's worth, I've had (FICO 8) 850s while reporting $1k+ on revolving cards (PIF, but letting them report), and with 2 of 3 cards (and 2 of 2 AU cards) reporting balances.  (Total util under 1% overall, and under 5% on any one card.)

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Refreshing to hear. I can only assume you have a rock-solid AAoA (with and without AUs)?

[iv]

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@Anonymous-own-fico wrote:

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@iv wrote:

For what it's worth, I've had (FICO 8) 850s while reporting $1k+ on revolving cards (PIF, but letting them report), and with 2 of 3 cards (and 2 of 2 AU cards) reporting balances.  (Total util under 1% overall, and under 5% on any one card.)

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Refreshing to hear. I can only assume you have a rock-solid AAoA (with and without AUs)?

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Yup.  Still over 8 years AAoA, even after adding three new accounts since July. (Although adding those three accounts did kill the 850s, at least temporarily...)