Question on utilization

Anonymous · ‎10-23-2018

Hello, everyone-

I have been working on my credit for about 6 months now and I was finally starting to see the results I wanted, I am looking to buy my first home sometime in May of 2019 so I am getting ready for that. I did, however, run into some issues recently and wasn't able to pay my cards how I normally would and I took a FICO 8 hit of 45 points. It is because 3 of my cards went from around 1% utilization to a lot more. One is at 98%, another is at 79% and the last is 30%. Recently I was approved for the Discover it card with a limit that would more than cover these balances. The total balance on all cards is $3,048 and the it card has a CL of $9,500, which is not showing on my reports yet, I just got the card today. If I transfer all the balances to the Discover card and then pay off enough to get the it card down to 28% usage should I see most if not all of those points return? I have worked really hard at getting my FICO score up and it is really disheartening to see such a big drop.

Thanks for your help!

Adkins · ‎10-23-2018

You won't recover all the points but I think you'll get a good part of them back. You got those points at lower utilization, which you won't be at anymore. (But it's much better than having the cards maxxed out!)

Last HP 08-07-2023

Anonymous · ‎10-23-2018

I'm sorry, I believe I posted this in the wrong area. I will move it to the right one. I don't know how to remove or if I even can, so if a mod could remove that would be great.

longtimelurker · ‎10-23-2018

@Anonymous wrote:
Hello, everyone-

I have been working on my credit for about 6 months now and I was finally starting to see the results I wanted, I am looking to buy my first home sometime in May of 2019 so I am getting ready for that. I did, however, run into some issues recently and wasn't able to pay my cards how I normally would and I took a FICO 8 hit of 45 points. It is because 3 of my cards went from around 1% utilization to a lot more. One is at 98%, another is at 79% and the last is 30%. Recently I was approved for the Discover it card with a limit that would more than cover these balances. The total balance on all cards is $3,048 and the it card has a CL of $9,500, which is not showing on my reports yet, I just got the card today. If I transfer all the balances to the Discover card and then pay off enough to get the it card down to 28% usage should I see most if not all of those points return? I have worked really hard at getting my FICO score up and it is really disheartening to see such a big drop.

Thanks for your help!

As utilization has no memory, as soon as your util drops, you will get points back. For mortages though, make sure you are getting the mortgage scores, rather than standard FICO 8/9, as they can be very different. Also, unless there is a real need, you may want to avoid anything that will generate an HP until you get the mortgage.

Anonymous · ‎10-23-2018

@longtimelurker wrote:
@Anonymous wrote:
Hello, everyone-

I have been working on my credit for about 6 months now and I was finally starting to see the results I wanted, I am looking to buy my first home sometime in May of 2019 so I am getting ready for that. I did, however, run into some issues recently and wasn't able to pay my cards how I normally would and I took a FICO 8 hit of 45 points. It is because 3 of my cards went from around 1% utilization to a lot more. One is at 98%, another is at 79% and the last is 30%. Recently I was approved for the Discover it card with a limit that would more than cover these balances. The total balance on all cards is $3,048 and the it card has a CL of $9,500, which is not showing on my reports yet, I just got the card today. If I transfer all the balances to the Discover card and then pay off enough to get the it card down to 28% usage should I see most if not all of those points return? I have worked really hard at getting my FICO score up and it is really disheartening to see such a big drop.

Thanks for your help!
As utilization has no memory, as soon as your util drops, you will get points back. For mortages though, make sure you are getting the mortgage scores, rather than standard FICO 8/9, as they can be very different. Also, unless there is a real need, you may want to avoid anything that will generate an HP until you get the mortgage.

Thanks, I do know my FICO 2 dropped about 37 points as well. That's why I am the most worried, it more than likely took me out of eligibility so I want to make sure I get this fixed.

HeavenOhio · ‎10-23-2018

Welcome, @Anonymous. Has your Discover card hit your reports yet? What was the age of your youngest account when you applied for Discover?

Anonymous · ‎10-23-2018

@HeavenOhio wrote:
Welcome, @Anonymous. Has your Discover card hit your reports yet? What was the age of your youngest account when you applied for Discover?

Hi, Heaven-

My Discover HP has hit but that is it. My youngest account was a month old, it was a new car loan.

HeavenOhio · ‎10-23-2018

Was your oldest account over a year old when you applied for the car loan? If so, part of those 45 points would be from taking your youngest account from over a year old to zero. The Discover card won't affect your AoYA (age of youngest account) because it was already zero when you applied.

When Discover reports, you'll possibly take a hit due to decreased AAoA (average age of accounts). Or you might not if you don't cross a threshold. If you're dinged for AAoA, it won't be a lot.

The balance transfer will improve your score quickly. Individual card utilization is determined by the card with the highest utilization. 32% individual card utilization is a heck of a lot better than 98%. Overall utilization will decrease too, but with the information at hand, I can't tell if the BT will cause you to cross a threshold or not.

But the key is to have your balances in check by the time you apply your mortgage. What happens between now and then isn't a biggie. When it's time to apply for the mortgage, position yourself to implement AZEO if necessary. That's when one card reports a small positive balance (at least $5 but not much more), with the rest of your cards reporting zero. A search will turn up lots of info on AZEO.

One more thing to keep in mind is your AoYA. If you can wait until your youngest account is a year old before applying for your mortgage, you'll get a nice point boost. If that's not feasible, just concentrate on avoiding any more inquiries or new accounts until the mortgage has closed.

Anonymous · ‎10-23-2018

Hello Jaw6501 and welcome:

The first thing is we don’t know what your other balance to CL are for each card. There are two major factors you need, Individual utilization ratios and total utilization ratio. In order to give you good information you need a couple things. First we need to know your other CLs (each card).

For example:

Card 1 balance $1,470 with CL of $1,500 (98%)

Card 2 balance $790 with CL of $1,000 (79%) and,

Card 3 balance of $788 with a CL of $2,600 (30%).

This gives you a current balance of $3,048 (as you said) with a CL of $5,100. That means your total utilization was 59.8%. Now you just got a Discover card with a $9,500 limit and I assume you have yet to use it (since you just got it). Add that limit to the limit on your other three cards. In my example your new CL is $14,600 and your new total utilization is now 20.9%. This will give you a bump when it reports; however, to maximize, you can take the three cards to zero as you suggested.

With a 3% balance transfer fee your new total balance is $3,140 and your total utilization is 21.5%. That won’t hurt you in this case and maybe the 3% fee is less than the interest you were paying on your other cards (assuming you get 0% interest on your Discover card for a few months at least). The other factor is that your Discover card utilization is now 33.1%. This will give you another bump in score since this is now your highest single card utilization – well below your old 98% utilization. If you could get the card below $2,650 by paying $490 now; you would have a Discover utilization safely below 28%. That will give you another little bump.

Now don’t forget once things start to report you will take some hits (inquiry, AoYA, and AAoA hits to mention a few); but overall you will like the bounce you get from doing this. You already did the hard part – get the CLI with the new CC. Keep going.

Y

SouthJamaica · ‎10-23-2018

@Anonymous wrote:
Hello, everyone-

I have been working on my credit for about 6 months now and I was finally starting to see the results I wanted, I am looking to buy my first home sometime in May of 2019 so I am getting ready for that. I did, however, run into some issues recently and wasn't able to pay my cards how I normally would and I took a FICO 8 hit of 45 points. It is because 3 of my cards went from around 1% utilization to a lot more. One is at 98%, another is at 79% and the last is 30%. Recently I was approved for the Discover it card with a limit that would more than cover these balances. The total balance on all cards is $3,048 and the it card has a CL of $9,500, which is not showing on my reports yet, I just got the card today. If I transfer all the balances to the Discover card and then pay off enough to get the it card down to 28% usage should I see most if not all of those points return? I have worked really hard at getting my FICO score up and it is really disheartening to see such a big drop.

Thanks for your help!

If your Discover IT card reports with a statement balance of 28%, while the 98%, 79%, and 30% cards report at zero, yes you will see a major increase in FICO 8.