Rebuilding Optimal Credit Utilization

[Anonymous]

CGID: BobWang's old FICO charts do show that even with 1 CC only, <9% does appear to help increase FICO versus 20% or 30% with just one card:

Of course this doesn't give us any accurate info on having 3 cards with whatever is reporting.

On my own data points with 6 cards, due to Irma one of my cards posted a statement over $50 ($2500 credit limit) and my scores did plummet a bit but that card reported over 35% (I was stuck on a boat during Irma with no cell signal so unfortunately I couldn't pay down to my usual $50).  

When I keep my one card at $50 (out of $2500) I personally see the biggest FICO boost overall!

[Anonymous]

This is all exaclty what i was looking for! Excellent advice for a newbie like me. I am studying overseas right now, so I would like to improve my credit by this time next year when I return. The goal is growing my credit in the long run, but also improving it as much as possible in this timeframe to have a solid base to work with when I get back, and have no issues with loans. 

These cards are striclty for rebuilding, so no other expenses than what is needed to grow and improve how you all said. So its safe to keep total utilization <8.99%, let them report and pay off immediately? I plan to use my Capital one and leave my VS at zero, only using it sparingly to keep the account open. 

This board is so helpful! Im really looking forward to learning from all of you!

[Anonymous]

Here's something you can do yourself:  try it both ways and report back with data points here -- it helps everyone!

Let 6% post at statement cut one month, and then next month try 16% or 26% and see if it affects your FICO scores (if you pay for credit monitoring or get it free from somewhere like creditscorecard.com).

This way you can get an idea of what effect carrying a balance might have, but you can "fix" it in a month!  If you aren't seeking credit for the next few months, it won't have any long term effect on your scores.

[Anonymous]

Great idea ABCD, i guess ill learn more from just jumping in (smartly) and getting my feet wet a little. I at least have a good understanding now of how it all works and reports. That way a few months out, I'll really know what i need to do to bump up that FICO score and how its done.

Thanks!

[Thomas_Thumb]

---

@Anonymous wrote:

Because FICO considers both individual utilization AND aggregate utilization in scoring.

If you want the BEST FICO score possible, it's AZEO with the one under 8.9%.

If you are carrying balances over 8.9% on one card, then you want to spread it out so no cards are over 8.9% and overall aggregate utilization is also under 8.9%.

But putting 15% on one card and 0% on the other card to get 7.5% scores FICO lower because one card is over 8.9%.

---

The above is incorrect relative to individual card utilization.

Fico looks at three factors relative to utilization - and they are scored independently from each other. Those factors are:

1) aggregate revolving utilization - this factor is given far more weight than the next two factors.

 - Maintain this under 9% for best results

2) number (or %) of cards reporting balances

 - This is very important for Fico mortgage scores. More muted with Fico 8 but still significant for most profiles. Generally best to report balances on less than 1/2 cards but always greater than 0% reporting a balance.

3) individual card utilization - scoring based on the revolving account with the highest % utilization.

 - Impact of individual card utilization is relatively minor. Many profiles see no affect as long as highest card utilization is maintained below 49% AND the total of cards reporting balances (aggregate) holds under 9%. To be ultra safe with this factor, keep utilization on highest card below 29%. I have yet to see any data that shows a scoring penalty relating to a card utilization in the 9% to 29% range when aggregate utilization is maintained under 9%.

Example - profile has 5 credit cards, each with $1000 credit limit and total balance of $400 reporting.

1) Aggregate utilization is 400/5000 = 8%

How best to distribute balance?

a) $400 on one card = 40% utilization + $0 on the other 4 cards.

b) $200 on each of 2 cards (20% utilization) + $0 on 3 cards.

c) $100 on each of 4 cards (10% utilization) + $0 on the last card

d) $80 on each of 5 cards (8% utilization)

The lowest scoring case will be "d" without question. If one has three or more cards, reporting balances on 100% of cards will drop your Fico 8 enhanced scores and Fico mortgage scores significantly. For most profiles, Classic Fico 8 score will drop as well.

The top scoring caes will be either "a" or "b". Actually, both may result in no score drop penalty. Personally, I would opt  for "b" but, the AZEO adherents would be well served by case "a".

Case "c" represents 80% of cards reporting balances and this will negatively impact Fico mortgage scores.

[Anonymous]

Spot on utilization post from TT above.

[wssuter]

This is great info and makes sense! I never knew about the AZEO method as I am also new to credit rebuilding but I am loving the experience I have been gaining. I have five credit cards, four are fairly new, and one is a little over a year old. I had thought until recently the best thing to do was pay balances in full every month. I noticed though that since I have received the credit cards and have been paying all of the balances in full that they are not reporting to the credit bureus at all,  as I was told that there is nothing to report. Should I let all of the credit cards report at least one time with a balance before incorporating AZEO? Out of those five cards, only two are reporting. Thanks

[Anonymous]

 Example - profile has 5 credit cards, each with $1000 credit limit and total balance of $400 reporting.

1) Aggregate utilization is 400/5000 = 8%

How best to distribute balance?

a) $400 on one card = 40% utilization + $0 on the other 4 cards.

b) $200 on each of 2 cards (20% utilization) + $0 on 3 cards.

c) $100 on each of 4 cards (10% utilization) + $0 on the last card

d) $80 on each of 5 cards (8% utilization)

The lowest scoring case will be "d" without question. If one has three or more cards, reporting balances on 100% of cards will drop your Fico 8 enhanced scores and Fico mortgage scores significantly. For most profiles, Classic Fico 8 score will drop as well.

---

 This is an excellent example and what I was looking for. An outline of the pro/cons of the different scenarios. All this information from everyone is really helpful!

[HeavenOhio]

---

@wssuter wrote:

This is great info and makes sense! I never knew about the AZEO method as I am also new to credit rebuilding but I am loving the experience I have been gaining. I have five credit cards, four are fairly new, and one is a little over a year old. I had thought until recently the best thing to do was pay balances in full every month. I noticed though that since I have received the credit cards and have been paying all of the balances in full that they are not reporting to the credit bureus at all,  as I was told that there is nothing to report. Should I let all of the credit cards report at least one time with a balance before incorporating AZEO? Out of those five cards, only two are reporting. Thanks

---

Always pay your statement balances in full if you want to avoid interest. The balance you leave should come from new charges.

Your cards should be reporting, whether the balances are zero or not. Which bank are these cards from?

[Anonymous]

---

@wssuter wrote:

This is great info and makes sense! I never knew about the AZEO method as I am also new to credit rebuilding but I am loving the experience I have been gaining. I have five credit cards, four are fairly new, and one is a little over a year old. I had thought until recently the best thing to do was pay balances in full every month. I noticed though that since I have received the credit cards and have been paying all of the balances in full that they are not reporting to the credit bureus at all,  as I was told that there is nothing to report. Should I let all of the credit cards report at least one time with a balance before incorporating AZEO? Out of those five cards, only two are reporting. Thanks

---

Quick point on terminology:

From the way you describe what you have been doing, it sounds like you have been paying to zero (PTZ) prior to the statement printing.  PTZ is not the same thing as paying in full (PIF).  To PIF means to pay whatever balance appears at the top of the statement in the (roughly) 25 days following the statement date -- and to pay that amount in full.

Thus, if you use a card, allow the statement to print with an amount owed of $258, and then pay that $258 sometime in the three weeks following the statement, you have paid in full (PIF).  If you paid only $100, in contrast, then you would be carrying a balance of $158.   If you were to pay that $258 before the statement printed, so that the statement printed with a $0 amount owed, then you would have paid to zero (PTZ). 

You mention that your cards are not reporting to the credit bureau.  Are you sure you don't mean the cards that have been opened very recently?  Or do you also mean that the card you opened 11 months ago also does not appear on your credit reports?

If you only meant the cards that were opened recently, then that is not strange.  Cards can take up to three months to appear from the date they were opened.  That's common for Amex, for example.  Were the recent cards all opened in the last 45 days?