The Truth about Credit Card Utilization

[Anonymous]

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@Thomas_Thumb wrote:

The credit scoring algorithms are based on millions of data points to correlate target variables to risk. I expect some type of ANOVA was used to determine what attributes were statistically significant and which were not. Undoubetedly some scoring attributes identified for consideration or specific exclusion in the algorithms were influenced by input from customers (primarily lenders) and regulators.

For example, lenders want to get paid. Thus the removal of points deduct in Fico 9 for paid collections but, apparent re-instatement of points deduct for small unpaid collections. Carrot and stick motivation. 

BTW - There is no such thing as a "mortgage model" (other than the failed Fico 8 mortgage algorithm). The scores used as part of mortgage application reviews are generated by Classic Fico models: Fico 04 (EQ, TU) and Fico 98 (EX). 

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Thanks Thomas, BBS and others for all of your contributions on this thread and others that help us to get smarter about how FICO evaluates our credit histories and actions.

I have a complex experiment running this month. I have 15 cards (1AU), total CL has increased from 215k->275k from CLIs and 1 new card within the last 20 days. Thick file, no derogs, 18 months in the garden until 2 INQs from CLI requests and 1 card, all else clean.

As of 1.7.20:

-1 card at 88%

-1 card at 28%

-5 cards between 1% and 8.8%

-8 cards at 0.

-Total on cards 21K

-Aggregate UT 10%

By 1.31.20:

-1 card at 56%

-1 card at 28%

-5 cards between 1% and 8.8%

-8 cards at 0.

Total on cards 15K

-Aggregate UT 6%

Highest FICOs have average 810. Current scores average 795. I am estimating that 1.31 scores will be back to 810 or above. I will report back with anything remarkable that I learn.

[AllZero]

^ Based on ABCD2199 estimates, it is possible. ~10 points for aggregate crossing a threshold. ~5 points for individual crossing a threshold.

[Anonymous]

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@AllZero wrote:

^ Based on ABCD2199 estimates, it is possible. ~10 points for aggregate crossing a threshold. ~5 points for individual crossing a threshold.

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Zero, that is how it would seem. Per ABCDs guidance and remarks about mystery points. 

Summary of score ingredients:

Payment history: 0 lates, 0 collections, 0 derogs, 100% account paid as agreed

Length of credit history: average over 7 years, oldest over 20 years

Credit mix: mortgage, cards, installments

Amount of debt: highest ever on cards (several large 1-time expenses; 12K with 0 interest)

New credit: newest account 1mo, 3 INQs

We will see what the great FICO machine in the sky has to say about it.

[Anonymous]

Clean score card about 22 revolvers, aged profile, new accounts under 12 months, open loan.

Took one card to the high 90s and lost 20 points give or take a point or 2 across all three bureaus on version 8. Aggregate remained under 2% at all times.

[Anonymous]

Janus,

In my experience, reported income and monthly mortgage or rent payments are strongly correlated with credit limits. 

Lender likely are using the limits on other cards as a guide to establishing a limit on a new card.

I am not sure if you have requested CLIs on your existing cards. I have enjoyed pleasant success in increasing my limits from under 10K to over 40K on several cards, which, in turn, has led to higher starting lines on new cards. I will likely app for the Apple card later this month and I am expecting the limit to be 25-30K. 

The resources and help from the people on this board have been amazing. Before I began using this board and other similar boards, and gaining insights from folks like ThomasThumb and BBS (sorry, I cannot mention everyone!), I was not being granted 10K limits. I am a reasonably educated guy, but I was not FICO smart.  Using the guidance of others to educating myself on how credit reports and FICO work, and how creditors use it to make credit decisions about me has been incredibly valuable. I have added more than 100 points to my score. 

I can never thank you all enough!

[Anonymous]

Experiment update for anyone who is interested:

I have 15 cards (1AU), total CL has increased from ~215k->$275k (~260; waiting for 2 more CLIs to be reflected) and 1 new card in Dec. Thick file, AAoA 7.5Y and oldest over 20, 0 derogs, 18 months in the garden until 2 INQs from CLI requests and 1 new card, all else clean.

As of 1.7.20:

-1 card at 88%

-1 card at 28%

-5 cards between 1% and 8%

-8 cards at 0.

-Total on cards 21K

-Aggregate UT 10%

FICO average 795

As of 1.23.20:

-1 card at 56%

-1 card at 11%

-3 cards between 1% and 8%

-10 cards at 0

Total on cards 17K

-Aggregate UT 6.6%

Total CL 260

Experian updates the fastest, TU the slowest

FICOs (average) have gone from 795 to 811 (TU is lowest score). Was hoping for a few more points, but not unhappy.

[SouthJamaica]

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@Anonymous wrote:

Experiment update for anyone who is interested:

I have 15 cards (1AU), total CL has increased from ~215k->$275k (~260; waiting for 2 more CLIs to be reflected) and 1 new card in Dec. Thick file, AAoA 7.5Y and oldest over 20, 0 derogs, 18 months in the garden until 2 INQs from CLI requests and 1 new card, all else clean.

As of 1.7.20:

-1 card at 88%

-1 card at 28%

-5 cards between 1% and 8%

-8 cards at 0.

-Total on cards 21K

-Aggregate UT 10%

FICO average 795

As of 1.23.20:

-1 card at 56%

-1 card at 11%

-3 cards between 1% and 8%

-10 cards at 0

Total on cards 17K

-Aggregate UT 6.6%

Total CL 260

Experian updates the fastest, TU the slowest

FICOs (average) have gone from 795 to 811 (TU is lowest score). Was hoping for a few more points, but not unhappy.

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Get that 56 percenter down to 28% and you'll get those few more points

[Anonymous]

Thanks, Jamaica,

The 56% and 11% utilization cards are on 0% interest promo. I have money elsewhere that is doing more work for me at the moment. Both cards will be $0 within 6 months. That should coincide with earning points back when my 1 new card open and CLI related INQs age out.

My goal is to get to and stay in the 820-830 band and then strategically add new high-value cards. My research suggests that is the sweet spot for best cards, high SLs, and lowest interest (even though I PIF unless at 0%).  Let me know if you have knowledge that says otherwise.

Thanks again.

[SouthJamaica]

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@Anonymous wrote:

Thanks, Jamaica,

The 56% and 11% utilization cards are on 0% interest promo. I have money elsewhere that is doing more work for me at the moment. Both cards will be $0 within 6 months. That should coincide with earning points back when my 1 new card open and CLI related INQs age out.

My goal is to get to and stay in the 820-830 band and then strategically add new high-value cards. My research suggests that is the sweet spot for best cards, high SLs, and lowest interest (even though I PIF unless at 0%).  Let me know if you have knowledge that says otherwise.

Thanks again.

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Well, since you ask, IMHO

1. the sweet spot is lower than that, 760 and up

2. it's not necessarily a great idea to keep adding "high value" cards because (a) it causes one to water down and diminish the benefits from the cards one already has -- the one exception being people who do a huge amount of traveling; as a general rule I think it's better to concentrate on maximizing the benefits from good cards one already has and (b) adding cards keeps one's scores from ever being way up there

3. low interest is meaningless on rewards cards, because any actual interest paid -- high or low -- wipes out the value of the rewards

4. low interest is truly only attainable from credit union non-rewards platinum cards, which I happen to love, but which are only good for balance transfers and cash advances

[Anonymous]

Hi Jamaica,

Apologies that I did not notice in our prior interaction your impressive total CL. That is a BIG number.  

Can you share how long it took you to go from 200-600? Aside from apping and CLIs, what insights, suggestions, and lessons learned do you have for others with regard to your journey (do, don't do, do sooner, etc)?

Thanks in advance!