Reducing multiple balance effect on FICO scores

[Reighn9]

I may be able to pay off several cards with balances at/under $1000 and pay down some higher ones. My score has been going down when my balances go down and increases when my balances increases. I recently paid off a car loan 4 months early and my scores dropped about 25 points on each CRA. I do have 2 more loans. I have have utilization and DTI (depending what is counted). How is paying off some cards and down some others going to effect my scores? What is a good strategy>

[SouthJamaica]

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@Reighn9 wrote:

I may be able to pay off several cards with balances at/under $1000 and pay down some higher ones. My score has been going down when my balances go down and increases when my balances increases. I recently paid off a car loan 4 months early and my scores dropped about 25 points on each CRA. I do have 2 more loans. I have have utilization and DTI (depending what is counted). How is paying off some cards and down some others going to effect my scores? What is a good strategy>

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Installment utilization and credit card utilization are 2 separate things.

FICO 8 is affected by aggregate open installment loan utilization percentage. If you pay off one loan you lose the denominator from that loan in the computation, thus raising the percentage.

FICO 8 is also affected by aggregate credit card utilization percentage. With this, the lower the better, so long as it's not zero. The more credit cards reporting at zero the better, except that having all cards reporting at zero causes a dip. So one should have at least one card reporting a small balance. As to your specific question, paying off some cards and down some others is a good thing, and will improve your scores.

[jamie123]

To groom your credit scores and get them as high as possible you want your credit cards looking like this on your reports:

One card reporting a balance that is less than 10% of its credit line and all other cards reporting $0.

If you can't pay all your cards to $0, it is best to pay as many as you can to $0 and let the others report a balance. You will actually pick up points for each card that reports $0.

[Anonymous]

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@jamie123 wrote:

If you can't pay all your cards to $0, it is best to pay as many as you can to $0 and let the others report a balance. You will actually pick up points for each card that reports $0.

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While this may be true in many cases, in some it is not.  For my profile it doesn't matter if I have 1 card or all of my cards reporting small balances.  The only time I see a score change is if all of my cards report $0.  As long as one or more reports a small balance, up to 100% of them, my scores are the same. 

Because of this, on my profile if I were to have all of my cards at say 10%+ utilization, it's completely feasible that me paying off a little bit on 3-4 cards in order to bring their balances to below 9% (across a threshold) that I'd see more of a score bump than if I were to pay 1 or 2 of them down to $0 while leaving the others at > 10%.  Of course I've never actually tested this, nor will I ever since my credit limits are high enough now to make that a near impossibility.

[HeavenOhio]

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@Anonymous wrote:

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@jamie123 wrote:

If you can't pay all your cards to $0, it is best to pay as many as you can to $0 and let the others report a balance. You will actually pick up points for each card that reports $0.

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While this may be true in many cases, in some it is not.

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I'm in the "not" group.

I've seen that…

1. my Experian score bumps up if less than half of my seven cards report.
2. my Experian and TransUnion scores don't change if I have tiny balances on one, two, or three cards.
3. my Equifax score is dinged if more than one card reports.
4. my Experian score is dinged if a retail card is the only one reporting, but Equifax and TransUnion don't care.

But that's for me, and it's not necessarily the case for someone else.

We do know that all cards reporting a zero balance is likely to ding just about everyone. And we know that having overall utilization under 9% works. So to offer safe advice, the suggestion is to have all cards report zero except for one that reports a small balance. And the one that reports the small balance should be a major card. Multiple cards reporting a balance may or may not have an effect. But fewer cards reporting a balances is generally better.

[Anonymous]

I agree with everyone. It bottom lines to your overall credit profile. Experian used to be my cruel report but now that a collection hit it and I took a huge point drop, it seems to be rebounding faster with reducing my ulitzation on a per card basis. Before hand I would zero out several cards and no change would happen. Now my TU is clean with the exception of a few student loan lates (that are about to age off) my utlization pretty much reports the same across all 3. But here's something I set down finally with my 3B pulled last week, none of the reports are exact matches, the factors they gave are different on each one, one says my bankcard balances are high even though I'm using 6% on bankcards not retail cards, so needless to say, I just gave up trying to pinpoint the ebbs and tides on the scoring side. I just pay attention now on what not to do