The Truth about Credit Card Utilization

[Anonymous]

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BBS...about 1 year and 1 month....I just had gotten my 1 yr spade in the garden a few weeks before I decided to pay off the 3 wheeler. I could have just withdrawn it from my 401k, but that might make me pay taxes on too much of my social security, so I went this route. I just wanted a clear title in case I decide to sell the goldwing. I never rode it once last summer, and have only ridden it once so far this year. Being disabled does not prevent me from riding, it just prevents it from being enjoyable.

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When your AoYA reached 12 months about a month ago, what types of score increases did you see?  I would think around 15 points on average, but I'm curious.  Certainly whatever was gained at that point would be lost with an AoYA drop to 0 months.  I believe the AoYA drop would be the single biggest scoring impact element, although there are other things going on as well.

[sarge12]

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@Thomas_Thumb wrote:

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@sarge12 wrote:

Well after having spent just over a year in the garden...I suspect I have blown my score this month badly. I had about 3500 loan on my 3 wheel goldwing that I paid off to get the title. I then took out a discover personal loan for 3500 to replinish the depleted checking account. I have now made 1 payment on this of 108.14 plus an extra 50 bucks. Then I recieved a credit card offer for Bank of America for 18 month 0 fee 0 interest on balance transfers and purchases...so I applied, instant approval for 7000. Transferred 3300 of the discover loan to it, and will pay the rest of the discover loan off by July 6 due date....less than 100 dollars. So in 2 months I will have closed a secured installment account, opened an unsecured installment loan, closed that installment loan, opened a new credit card with 7000 limit and transferred 3300 to it. Also 2 hard pulls. No idea how many points all this will knock off my 825+ credit scores. What do you guys think. On a good note, I now have title to the wing and the money owed on it is now at 0% interest for 18 months, and not even a transfer fee. Will set that card at 200 per month auto pay and sd the card since it has absolutely no rewards.

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To recap you went from no new accounts under 12 months to adding 3 new accounts (2 CCs and a personal loan). The personal loan is now closed and you have no open loans on file. Your AAoA certainly will drop but, we don't know the before/after ages at this time. Your individual card utilization is $3300/$7000, about 47%. That will impact your score some as well. Aggregate UT% is still quite low so no impact there. Not sure how your 3 inquiries were distributed among the CRAs.

Just a wild guess - I'd put your score in the 785 range +/- 10 points depending on CRA.

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TT...not exactly...only 2 new accounts...the personal loan that will close, and the 1 BOA credit card that will have the transferred debt at 0%. I will still have a car payment account open in my name as my neice's vehicle is under my credit and she is making payments through payroll deduction into a joint checking account. This and my Mortgage remain as my only installment loans...the car 60% of original loan amount, mortgage at 30% of original loan amount. I will now have 2 cards report a balance..the new 1 at 3300 of 7000 so about 45% util. Also another real low interest card that has my sister as AU, and all charges are hers and she pays it with a joint checking account with her...it is at 5200 of 10000 for 52% util.@ 4.99% interest. 15 other cards are always PIF. So I went from AZEO to AZE2. It will probably take a few months for the full effects to be known and I'll try to remember to update you. The scores in my signature are the most recent known from either Discover AMEX or Myfico pull for the equifax...which I have no free source for monthly update.....edit to add that aggregate utilization will be about 6% or about that on cc acounts.

[sarge12]

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@Anonymous wrote:

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BBS...about 1 year and 1 month....I just had gotten my 1 yr spade in the garden a few weeks before I decided to pay off the 3 wheeler. I could have just withdrawn it from my 401k, but that might make me pay taxes on too much of my social security, so I went this route. I just wanted a clear title in case I decide to sell the goldwing. I never rode it once last summer, and have only ridden it once so far this year. Being disabled does not prevent me from riding, it just prevents it from being enjoyable.

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When your AoYA reached 12 months about a month ago, what types of score increases did you see?  I would think around 15 points on average, but I'm curious.  Certainly whatever was gained at that point would be lost with an AoYA drop to 0 months.  I believe the AoYA drop would be the single biggest scoring impact element, although there are other things going on as well.

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BBS...About 10-15 points would be close, best I can tell. The whole purpose of all of this was to get a clear title, and the transfer was to get the interest on the debt to 0%. The only interest I now personally pay is on the mortgage at 4.75%...balance on it is now 24000. I just hate paying interest.

[Thomas_Thumb]

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@sarge12 wrote:

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@Thomas_Thumb wrote:

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@sarge12

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To recap you went from no new accounts under 12 months to adding 3 new accounts (2 CCs and a personal loan). The personal loan is now closed and you have no open loans on file. Your AAoA certainly will drop but, we don't know the before/after ages at this time. Your individual card utilization is $3300/$7000, about 47%. That will impact your score some as well. Aggregate UT% is still quite low so no impact there. Not sure how your 3 inquiries were distributed among the CRAs.

Just a wild guess - I'd put your score in the 785 range +/- 10 points depending on CRA.

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TT...not exactly...only 2 new accounts...the personal loan that will close, and the 1 BOA credit card that will have the transferred debt at 0%. I will still have a car payment account open in my name as my neice's vehicle is under my credit and she is making payments through payroll deduction into a joint checking account. This and my Mortgage remain as my only installment loans...the car 60% of original loan amount, mortgage at 30% of original loan amount. I will now have 2 cards report a balance..the new 1 at 3300 of 7000 so about 45% util. Also another real low interest card that has my sister as AU, and all charges are hers and she pays it with a joint checking account with her...it is at 5200 of 10000 for 52% util.@ 4.99% interest. 15 other cards are always PIF. So I went from AZEO to AZE2. It will probably take a few months for the full effects to be known and I'll try to remember to update you. The scores in my signature are the most recent known from either Discover AMEX or Myfico pull for the equifax...which I have no free source for monthly update.....edit to add that aggregate utilization will be about 6% or about that on cc acounts.

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Sarge, thanks for the clarification

Looks like you still have an open installment loans and you already have a card at a higher utilization % reporting. Given those attributes, I  over estimated the score impact of your recent activities. For just the new accounts and inquiries a 15 point drop seems about right.

My previous estimate included a ding for no open loans and an increase in highest card UT from under 9% to 47% - incorrect assumptions on my part.

[sarge12]

@Thomas_Thumb....I hope 15 point drop is correct, that would keep all 3 still above 800. In any case, getting the title to the goldwing and having that debt go to 0% will be worth the drop in score if not extremely bad. It will save me slightly over 300 dollars interest, and I now have the title in hand should I decide to sell the goldwing. PS...Thank you and BBS for your input.

[sarge12]

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@sarge12 wrote:

@Thomas_Thumb....I hope 15 point drop is correct, that would keep all 3 still above 800. In any case, getting the title to the goldwing and having that debt go to 0% will be worth the drop in score if not extremely bad. It will save me slightly over 300 dollars interest, and I now have the title in hand should I decide to sell the goldwing. PS...Thank you and BBS for your input.

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OK...a minor update...I recieved the BOA card today and called to activate the card. It was activated promptly, but then they hard pressed me to get another rewards credit card with a 150 dollar SUB that is preaproved on the same hp as the other card with 1.5% cash back. The greedy part of my brain says 150 dollars free money with no new hard pull...ok...go ahead. Instant approval with 11000 credit limit. Now I will run back to the garden for sure.

[arkane]

Congrats on that awesome SL! Yeah I know what you mean about wanting to keep your scores pristine so you can proudly put them on display LOL. But trust me, those scores are there to be USED, and reaping the benefits of having a great credit score is exactly what you should be doing.

[Anonymous]

Sarge, I don't see any issue with the second card and getting the free $150 with respect to your scores.  Your AoYA was already going to be 0 months from the first card and like you said, there weren't any additional inquiries.  Your AoOA of course remains unchanged and your AAoA was in a solid enough place that adding 1 account or adding 5 accounts likely wouldn't cause you to cross a score-dropping threshold.  Bottom line, I think there would be zero difference on your profile score wise from adding the second account verses just the one.

[HeavenOhio]

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@arkane wrote:

Congrats on that awesome SL! Yeah I know what you mean about wanting to keep your scores pristine so you can proudly put them on display LOL. But trust me, those scores are there to be USED, and reaping the benefits of having a great credit score is exactly what you should be doing.

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I figure that a credit score is kind of like a savings account. You spend most of your time saving. Doing that allows you to spend once in a while.

[Anonymous]

Hi there- firstly, thank you so much for this amazing post. This is probably one of the best theories I've read on the topic. I have something that's been concerning me regarding my FICO8 score and I would really value your insight if you have time: 

I have 2 lines of revolving credit on my Experian report, one open CC account with a UTL of 22% and a credit limit of $22,200 (Note: I am an *authorized user* on this account), and another which is a 6-year old charge off from BofA that BofA still reports every month as unpaid/negative. This charge off reports that I am using 109% of my available credit. 

I recently looked up my credit report via Discover's website, which included my FICO8 score, but I found there was no evidence of my authorized user card to be found anywhere on my account listings, and it merely said my overall credit UTL was at 109% (meaning it was only counting the charge off). Discover says they get all the info for this report from Experian. Does this mean FICO8 is excluding my authorized user card in its scoring process? Why are both cards viewable on my Experian report on Experian's website, but not included on my report on Discover's creditscorecard.com when Discover claims they get this info from Experian? 

Any light you can shed on this would be greatly appreciated. Thanks again