Questions about dropping utilization

[Anonymous]

Currently my credit scores are hovering around 690

I have...

12 bank charge cards (visa,MC,Amex), 

6 store cards

Overall utilization is currently at 38%  (19k used / 50K limit)

also, 17 of the cards have a current balance

according to the score simulator my score should raise into the 800's if I pay off these balances over the next 24 months.

My question is will it take 24 months to see this much increase, or if I pay down my cards so my overall util. is < 8% and only 2 or 3 have small balances will my score jump immediately, or will it increase slowly over 24 months?

Can my credit score be hurt by having too many cards open, even if they are zero balance?  If so I could close some of the smaller limit cards.

Thanks

Tim

[Revelate]

You're nowhere close to the "too many cards" line that some people have allegedly stumbled over.

If we're just talking revolving utillization it's instant in time: if you pay it down today, you'd get the boost as soon as it reports.  The simulator may be taking other factors into account on the 24 month bit, and you have to take the simulator with a grain of salt anyway.

Paying down revolving debt on any APR north of maybe 5% these days is the righteous thing to do financially anyway, so I'd certainly recommend doing that if possible.

[Anonymous]

To see the largest score benefit from utilization, follow these 2 rules:

1. Individual card AND Overall utilization <9% - with 50k overall, that means under $4,500.  Additionally you also want your individual cards to each be under this threshold if at all possible

2. More than 50% of cards reporting a zero balance - a great opportunity to achieve this one would be to pay off and keep open your lower limit cards.

There is more subtle nuance of course that my fellow posters will no doubt chime in on - but these broad strokes should get you at least half the distance to the goal line.

YMMV, and Good luck!

[SouthJamaica]

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@Anonymous wrote:

Currently my credit scores are hovering around 690

I have...

12 bank charge cards (visa,MC,Amex), 

6 store cards

Overall utilization is currently at 38%  (19k used / 50K limit)

also, 17 of the cards have a current balance

according to the score simulator my score should raise into the 800's if I pay off these balances over the next 24 months.

My question is will it take 24 months to see this much increase, or if I pay down my cards so my overall util. is < 8% and only 2 or 3 have small balances will my score jump immediately, or will it increase slowly over 24 months?

Can my credit score be hurt by having too many cards open, even if they are zero balance?  If so I could close some of the smaller limit cards.

Thanks

Tim

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1. I think you mean 'credit cards', not 'charge cards'.

2. The simulator is not reliable, so forget about it except for fun.

3. You can optimize your credit card utilization factor by maintaining your cards this way:

(a) have 13 or more cards reporting a zero balance;

(b) let from 1 to 5 cards report small balances no greater than 29%, tops.

4. Your point gain will be immediate -- about a month once all cards have reported.

5. No your score will not be hurt by having 18 open accounts. You won't gain any points by closing accounts.

[Anonymous]

Great comments by the others.  One additional thought...

You seem open to the possibility of closing some accounts.  If any of your store cards seem like junk to you -- cards you almost never use, and which maybe you have to go out of your way to buy stuff on just to keep them open -- then you might consider closing those.  The insurance industry has a different scoring system from FICO, and in their model the mere presence of store cards damages your score.  Furthermore, more store cards damages it more than just a few.

Here are the signs that might suggest a store card is worth closing:

(1)  You rarely use it

(2)  You can buy stuff at that store with better rewards using one of your major cards

(3)  The credit limit is tiny compared to your other cards

(4)  It is not your oldest open card

(5)  You have to buy stuff on it that you don't really need, once a year, just to keep it from being closed by the issuer. 

If most of those things are true about a store card, then maybe it is a good candidate for being closed

And then, as far as annual fee cards goes (and this includes major cards), you can and should look much more closely at closing or PC-ing any that are not a huge value to you.  I did that last year with my Amex BCP.