Spreading High Balance Cards to Lower Card Utilization

[Anonymous]

Morning MyFico'rs

Have a question for all of you. I recieved an email from another credit monitoring website (Not to be mentiond) that I could boost my overall credit health by spreading my balances that are over 50% utilization over other cards that I either have 0% utilization. I know that my overall utilization will not change but they noted that if my higher % utilization cards moved below 50%, that it would improve my overall credit health?

Anyone done this kind of spreading over lower or no utilization % cards? Appreciate any comments or suggestions.

[HeavenOhio]

What you describe is possible, but we'd need to see a list of your current cards, their balances, and their limits.

What you'd be doing is lowering your "individual card utilization," which is determined by the card that has the highest utilization. However, if you're spreading balances around, you might end up with more cards reporting postive balances. Individual card utilization usually has a more significant effect, though.

Note that "below 50%" means 48.9% or below. That's because 49.0000001% will round up, and you'll no longer be below 50%.

If you're paying interest, you'll want to be at 47% or below to keep the next month's interest from bumping you back over the threshold. Thresholds to aim for are 88.9% (maxed), 68.9%, 48.9%, 28.9% (responsible), and 8.9% (optimum). If you're paying interest, aim for 87%, 67%, 47%, 27%, or 7%.

[Anonymous]

Any benefit here would be next to nothing, IMO.

As HO explains above, you're exchanging higher individual utilization cards for more accounts with balances.  Dropping a couple 2-3 thresholds on highest individual card could yield someone a (say) 15 point gain on a FICO score, but if they move from 1-2 cards with balances to all of them with balances to accomplish this, perhaps they lose 13 points.  +15 - 13 = 2 points as a net gain here.  Of course these numbers aren't meant to be exact or anything, but regardless of whether or not the gain is 2 points or a little more, I really don't think it would ever be significant.

[Anonymous]

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@Anonymous wrote:

Any benefit here would be next to nothing, IMO.

As HO explains above, you're exchanging higher individual utilization cards for more accounts with balances.  Dropping a couple 2-3 thresholds on highest individual card could yield someone a (say) 15 point gain on a FICO score, but if they move from 1-2 cards with balances to all of them with balances to accomplish this, perhaps they lose 13 points.  +15 - 13 = 2 points as a net gain here.  Of course these numbers aren't meant to be exact or anything, but regardless of whether or not the gain is 2 points or a little more, I really don't think it would ever be significant.

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BBS

Thank you, much appreciate the insight. That was my thought. There are 7 cards that are hoovering around 50% utilization and 14 other cards with 0% utilization, so not too sure if the spreading to any of my 14 other cards will do much... I'm thinking may be best to just pay down the 7...

All the Best

TverTrekker

[HeavenOhio]

You're pretty close to 47%. Looking at it from a non-scoring point of view, I think it'd be preferable to avoid balance transfer fees.

[Anonymous]

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@HeavenOhio wrote:

You're pretty close to 47%. Looking at it from a non-scoring point of view, I think it'd be preferable to avoid balance transfer fees.

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HO

Thank you. I did my first balance transfer about 2 months ago to a card that had 0% for 18 mos. Due to the lag in reporting I took a hit on my CS, but had a bump after the one I transfered the balance noted "paid trade line." 

I think I'll take the advice and just pay down the CC with the higher balances versus incur multiple transfer fees... Thanks again and --- Thanks everyone, for your contribution to the discussion!!!

[HeavenOhio]

@Anonymous, if another 0% opportunity falls in your lap, certainly take advantage of it as long as the rest of the terms make financial sense. The ding for another card reporting will be little. And with the number of accounts you have, it may be nothing.

When you transfer, the scoring aspect to pay attention to is individual card utilization. Because that's the thing you're trying to bring down, I'd try to keep the transfer card's utilization in line with the utilization on your other cards. For example, if you did a transfer today, it'd make sense to stay under 48.9%. After you've paid your balances down further, you might want to keep any BTs to 28.9%.

[Anonymous]

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@HeavenOhio wrote:

@Anonymous, if another 0% opportunity falls in your lap, certainly take advantage of it as long as the rest of the terms make financial sense. The ding for another card reporting will be little. And with the number of accounts you have, it may be nothing.

When you transfer, the scoring aspect to pay attention to is individual card utilization. Because that's the thing you're trying to bring down, I'd try to keep the transfer card's utilization in line with the utilization on your other cards. For example, if you did a transfer today, it'd make sense to stay under 48.9%. After you've paid your balances down further, you might want to keep any BTs to 28.9%.

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@HeavenOhio, Thank you. I'll absolutely take the recommendation into consideration. And most definately am planning on keeping my utlization below the 28% mark...  

[Thomas_Thumb]

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@Anonymous wrote:

Morning MyFico'rs

Have a question for all of you. I recieved an email from another credit monitoring website (Not to be mentiond) that I could boost my overall credit health by spreading my balances that are over 50% utilization over other cards that I either have 0% utilization. I know that my overall utilization will not change but they noted that if my higher % utilization cards moved below 50%, that it would improve my overall credit health?

Anyone done this kind of spreading over lower or no utilization % cards? Appreciate any comments or suggestions.

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Generally it is best to have some cards with zero balance and all cards below 49% - IMO. However, I would not bother with a balance transfer unless a card or cards is 69% or higher and:

1) It would remain over 69% for an extended timeframe

2) APR on the card with a high balance is greater than the card you would transfer the balance to.

Having more cards reporting balances can result in a small score drop but, this is a weak factor on Fico 8. Having a maxed out credit card can be problematic.

As an example, if you have 2 cards with $5K credit limits and one has a balance of $4.5k and the other zero, you might see a 15 point gain by splitting the balance so each card reports $2.25k. Is the point gain itself worth a transfer fee? Perhaps not. If it also reduces the risk of adverse action such as a CLD then it might have merit.

[NRB525]

OP, for more perspective, can you list out your cards, their limits, the balance being carried on each (even if zero) and the relevant APR being paid for the open balances? The best action, of course is to pay down balances, but if that is going to take time, and APR are high on some of the balances, it can make sense to BT for lower interest costs.

The outlines of utilization levels is relevant for scoring, but the payoff of the cards is easier to accomplish with lower interest cost on a monthly basis.