Raising FICO Strategy

[Anonymous]

I'm still learning, so please bear with me. I have a 2% utilization showing on the CRAs. I allowed several cards to post small balances last month. I have seen some positive movement, however I'm trying to squeeze out a better FICO as I move forward in the garden.

I have recently been told I should let 2 CC report 5% utilization each month, then pay them off right away. If I used my one CC that has a $500 CL, I could easily let a $25 charge report. Is this good strategy?

Also, I got a CLI from Discover for $1k and last night the 3x CLI from AMEX that took me from $2k to $6k. When that reports, are the CRA going to look positively on that or negatively because I have more available credit that could get me in trouble?

I've got AAOA of 5.6 years, absolutely no baddies at all, and always paid on time. I went crazy from Jan - Apr and gained a total of 12 new cards. I know my scores took a hit with those and I have several INQ on each, hence I'm in the garden because I don't need additional cards. I just want to get opinions on what I posted above that they will be looked positively by the CRAs.

[Thomas_Thumb]

A few points to consider:

1) credit agencies do not know that you are paying off a credit card in full or are carrying a balance. Data analysis is automated and the models only look at a CRA reported balance relative to your credit line. Therefore, whether or not you carry a balance month to month or pay in ful should have no affect on the computed score.

2) Usually it is best not to show charges on more than four revolving credit cards during a reporting cycle (three is better). I would suggest using a high limit credit card as your primary one that would be used every month and then limiting use to three (or two) other cards each month. You can rotate use among your "non primary" cards but leave some gap time to avoid having them overlap too much and all show a positive balance in a given reporting cycle.

3) Credit reporting agencies do just that - report data. The FICO and VantageScore models (and others) use the data to calculate scores. Increases in available credit are never a negative factor in a model. The negatives come from new cards which reduce the average length of your credit history and hard inquiries that may come from your credit card company if you ask them to raise your credit limit and when you apply for new cards. If the card company raises your limit "automatically without you asking" they don't perform a hard inquiry.

[CreditDunce]

It depends on your goal.  By letting only one credit card report 1-9% of that CL's balance, you are approximately maximizing your score for the current month.  If you want to see how much your score climbs each month, then do exactly that. 

If you are in the garden with a decent score, I say just let as many cards report as you use.  Just pay in full each month.   You probably don't want to let a card report all maxed out, but even that is probably ok if you are paying everything in full.  The only times you need to worry about your utilization is a month or two before you plan on app'g again.  Once you "pretty" up your utilization by making sure only one card reports a small balance, your score will shoot right up to where it would have been if you had been micromanaging the entire time.

FICO doesn't care about your credit limits.  What it cares about is your utilization ratio.  By getting CLI's and not increasing your spending, your utilization will go down.  Normally a lower utilization will give you a higher score.  If you are micromanaging your utilization, a higher CL will have minimum impact on your credit score.

CLI's will almost never cause any of your other lenders to get concerned.   There may be some cases where a CLI could cause you problems, but they are extreme cases.  For example, let's say your total exposure with Chase (just for a bank name) is at 40k between several cards.  You request CLI's and bump up your total credit with Chase to 70k.   The credit risk group (different than the CLI group) may see your higher credit limits and decide to take AA to reduce their risk.  But the credit risk group, probably doesn't care that much what your CL at other credit card companies is.  They may care about your balances (especially if they think you are carrying a balance).

[CreditDunce]

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@Thomas_Thumb wrote:

A few points to consider:

1) credit agencies do not know that you are paying off a credit card in full or are carrying a balance. Data analysis is automated and the models only look at a CRA reported balance relative to your credit line. Therefore, whether or not you carry a balance month to month or pay in ful should have no affect on the computed score.

2) Usually it is best not to show charges on more than four revolving credit cards during a reporting cycle (three is better). I would suggest using a high limit credit card as your primary one that would be used every month and then limiting use to three (or two) other cards each month. You can rotate use among your "non primary" cards but leave some gap time to avoid having them overlap too much and all show a positive balance in a given reporting cycle.

3) Credit reporting agencies do just that - report data. The FICO and VantageScore models (and others) use the data to calculate scores. Increases in available credit are never a negative factor in a model. The negatives come from new cards which reduce the average length of your credit history and hard inquiries that may come from your credit card company if you ask them to raise your credit limit and when you apply for new cards. If the card company raises your limit "automatically without you asking" they don't perform a hard inquiry.

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1) I recommend the OP pay in full every month for two reasons.  First you lose your grace period if you don't PIF.  Secondly, the CCC can tell if you are PIF or carrying a balance.  By PIF the CCC is much less likely to be concerned with utilization spikes.

2) 3-4 cards is a reasonable number of cards to let report when you have a dozen TL's.  It depends on what your short term goal is.

3) Vantage 3.0 does take into account your credit limits.   The higher the better with Vantage.  I do not believe it is a big factor, however.  Discover and Amex are two CCC's that allow customer initiated SP CLI's.   But, I do agree with the thrust of point #3.

[Anonymous]

Thomas and CreditDunce - thank you both for your insightful thoughts and hints. My strategy with my 13 cards is as follows:

US Bank Cash+ - monthly I will put my Verizon $165 because of the 5% cash back.

A rotational card for my utility bill each month.

Discover - will be for all of my misc expenses like food, insurance bills, etc. because they have treated me so well this year and the 2x Cashback bonus for the next 12 months.

The first couple of months of using cash rewards cards was a true hassle and a pain trying to keep them all straight. The above strategy should be a good rotation for the cards and keeps them out of the SD or face getting cancelled for non-use. I will pick a card I will allow some balance to report and PIF before due date. 

[Revelate]

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@Thomas_Thumb wrote:

A few points to consider:

1) credit agencies do not know that you are paying off a credit card in full or are carrying a balance. Data analysis is automated and the models only look at a CRA reported balance relative to your credit line. Therefore, whether or not you carry a balance month to month or pay in ful should have no affect on the computed score.

2) Usually it is best not to show charges on more than four revolving credit cards during a reporting cycle (three is better). I would suggest using a high limit credit card as your primary one that would be used every month and then limiting use to three (or two) other cards each month. You can rotate use among your "non primary" cards but leave some gap time to avoid having them overlap too much and all show a positive balance in a given reporting cycle.

3) Credit reporting agencies do just that - report data. The FICO and VantageScore models (and others) use the data to calculate scores. Increases in available credit are never a negative factor in a model. The negatives come from new cards which reduce the average length of your credit history and hard inquiries that may come from your credit card company if you ask them to raise your credit limit and when you apply for new cards. If the card company raises your limit "automatically without you asking" they don't perform a hard inquiry.

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Depending on the creditor, your payments may be reported to the bureaus.  If it is on the CRA's report, then it is fair game for the lenders to use in their underwriting decisions.

It is correct to say though that FICO doesn't analyze this information, but FICO is only one part of the equation for qualifying for any given credit product.

Also the "best not to show charges on more than four revolving credit cards" really has no basis in reality.  Fewer is better, 1 is generally optimal for everyone from testing, but there's no magic number to it that will make lenders toss your application out on that although FICO does calculate based on this metric.  Not really a big deal unless someone is applying for something.

Agreed with everything else!

@Anonymous: your scores are gold-plated anyway, unless you do something awkward (late payment or whatever) you're above the highest tier that's set anywhere in the market... approval / denial will be based on everything else except your FICO score as a result so I honestly wouldn't worry about it.

[Anonymous]

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@Revelate wrote:

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@Thomas_Thumb wrote:

A few points to consider:

1) credit agencies do not know that you are paying off a credit card in full or are carrying a balance. Data analysis is automated and the models only look at a CRA reported balance relative to your credit line. Therefore, whether or not you carry a balance month to month or pay in ful should have no affect on the computed score.

2) Usually it is best not to show charges on more than four revolving credit cards during a reporting cycle (three is better). I would suggest using a high limit credit card as your primary one that would be used every month and then limiting use to three (or two) other cards each month. You can rotate use among your "non primary" cards but leave some gap time to avoid having them overlap too much and all show a positive balance in a given reporting cycle.

3) Credit reporting agencies do just that - report data. The FICO and VantageScore models (and others) use the data to calculate scores. Increases in available credit are never a negative factor in a model. The negatives come from new cards which reduce the average length of your credit history and hard inquiries that may come from your credit card company if you ask them to raise your credit limit and when you apply for new cards. If the card company raises your limit "automatically without you asking" they don't perform a hard inquiry.

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Depending on the creditor, your payments may be reported to the bureaus.  If it is on the CRA's report, then it is fair game for the lenders to use in their underwriting decisions.

It is correct to say though that FICO doesn't analyze this information, but FICO is only one part of the equation for qualifying for any given credit product.

Also the "best not to show charges on more than four revolving credit cards" really has no basis in reality.  Fewer is better, 1 is generally optimal for everyone from testing, but there's no magic number to it that will make lenders toss your application out on that although FICO does calculate based on this metric.  Not really a big deal unless someone is applying for something.

Agreed with everything else!

@Anonymous: your scores are gold-plated anyway, unless you do something awkward (late payment or whatever) you're above the highest tier that's set anywhere in the market... approval / denial will be based on everything else except your FICO score as a result so I honestly wouldn't worry about it.

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Thanks! My INQs are through the roof. In 2015 I have 10 EX, 6 EQ and 9 TU. When FNBO turned me down for a stupid Sheetz gas card, that was my eye opener that put me in the garden.

[Revelate]

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@Vulcan1600 wrote:

@Anonymous: your scores are gold-plated anyway, unless you do something awkward (late payment or whatever) you're above the highest tier that's set anywhere in the market... approval / denial will be based on everything else except your FICO score as a result so I honestly wouldn't worry about it.

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Thanks! My INQs are through the roof. In 2015 I have 10 EX, 6 EQ and 9 TU. When FNBO turned me down for a stupid Sheetz gas card, that was my eye opener that put me in the garden.

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Ah, we've seen that on a number of low-underwriting cards actually when high FICO strata people apply for them.  Yeah, you've got a bunch of inqs (all from CC's or auto/mortgage/other?) interesting to see you're still north of 800 on FICO 8 even with all those on there.

Really for you, improvement is simply from time passing and not doing anything silly... you'll be fine

[Anonymous]

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@Revelate wrote:

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@Vulcan1600 wrote:

@Anonymous: your scores are gold-plated anyway, unless you do something awkward (late payment or whatever) you're above the highest tier that's set anywhere in the market... approval / denial will be based on everything else except your FICO score as a result so I honestly wouldn't worry about it.

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Thanks! My INQs are through the roof. In 2015 I have 10 EX, 6 EQ and 9 TU. When FNBO turned me down for a stupid Sheetz gas card, that was my eye opener that put me in the garden.

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Ah, we've seen that on a number of low-underwriting cards actually when high FICO strata people apply for them.  Yeah, you've got a bunch of inqs (all from CC's or auto/mortgage/other?) interesting to see you're still north of 800 on FICO 8 even with all those on there.

Really for you, improvement is simply from time passing and not doing anything silly... you'll be fine

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The INQs from January to present are all CC related. However, back in December there were some INQs from when I bought a truck. So add about 2 INQs to EX and TU.

[vanillabean]

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@Thomas_Thumb wrote:
Credit reporting agencies do just that - report data.

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Credit reporting agencies are not named so because they report data. They don't; they merely store the data that lenders report to them, so that various customers can pull credit reports at their convenience.