The Truth about Credit Card Utilization

[SouthJamaica]

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@Anonymous wrote:

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!

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I probably made that leap in about a year, but I wouldn't recommend the

aggressive credit-seeking which helped me get to that point.

Since you ask, my advice would be:

1. avoid hard pulls and new accounts

2. don't add accounts too quickly, and don't add accounts at all unless the card would really add something

3. avoid store cards

4. avoid subprime cards

5. try to cultivate relationships with credit unions instead of banks

[Anonymous]

Currently I am at 67% aggregate UT on 13 CC accts. I have about $84K in credit used and can I pay it all off next month. Then question is, should I pay it off in chunks, or down to 8%, or all of it at the same time? Will I be punished with several or all accts CLD? Obviously what is best for me, is no more interest regardless. Just a little nervous. I did go several months paying only the minimums, knowing I would be able top pay it off next month. I just recently this month started making $2-3K payments on several cards.

[Anonymous]

I don’t think they’re ever going to be mad about getting their money, and I think it will look even better when they see you have cleared your debts everywhere else as well. Shows you can manage your debt.

Now if you weren’t clearing all the other debt, then a CLD might be more likely. I think you’re fine to go ahead and pay it that’s what a rational person with means would do, so as not to have to pay more interest.

Scorewise it’s not gonna make a difference except under the versions that aren’t really being used yet.

[Anonymous]

Thanks Birdman,

So all zero balances will not punish me? I guess in the big picture, it really doesn't matter. I have read that keeping one out of three cards with a small balance, while the rest are at zero balnaces, is a good tactic for a higher score. How much will my score go up when I pay all of these off you think? I'm at 705, 704 and 708 FICO 8 now.

[Anonymous]

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@Anonymous wrote:

Thanks Birdman,

So all zero balances will not punish me? I guess in the big picture, it really doesn't matter. I have read that keeping one out of three cards with a small balance, while the rest are at zero balnaces, is a good tactic for a higher score. How much will my score go up when I pay all of these off you think? I'm at 705, 704 and 708 FICO 8 now.

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@Anonymous If you pay them all to zero and they all report zero you will suffer a AZ penalty of 10 to 20 points, profile depending. You want a small balance on one of those cards to report. yes all zeros will hurt you. 

[Anonymous]

As to how many points, that depends on your utilization level on each account and your overall utilization, so you would need to calculate individual and aggregate revolving utilization and I would say 5-10 points for each aggregate threshold, usually <5 points for an individual threshold, all profile and scorecard depending.

[SouthJamaica]

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@Anonymous wrote:

Currently I am at 67% aggregate UT on 13 CC accts. I have about $84K in credit used and can I pay it all off next month. Then question is, should I pay it off in chunks, or down to 8%, or all of it at the same time? Will I be punished with several or all accts CLD? Obviously what is best for me, is no more interest regardless. Just a little nervous. I did go several months paying only the minimums, knowing I would be able top pay it off next month. I just recently this month started making $2-3K payments on several cards.

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Pay it all off as fast as possible.

When you're down to zero, let one card report a small balance each month, then pay it off after the statement cuts.

[Anonymous]

Birdman,

What is an AZ penalty? So I can actually lose points paying them all off? When I do the simulator, it shows a gain of about 100 points or more, if I pay them off. I am kinda concerened about several CLD's when I do this.

[SouthJamaica]

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@Anonymous wrote:

Birdman,

What is an AZ penalty? So I can actually lose points paying them all off? When I do the simulator, it shows a gain of about 100 points or more, if I pay them off. I am kinda concerened about several CLD's when I do this.

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Forget the simulator, it's not reliable.

When you have all zeros reporting you get a penalty. The penalty can be avoided by having one bank card report a $10 balance before you pay it off.

[Anonymous]

@Anonymous AZ penalty is all zero penalty, if all your revolvers report zero you take a 10 to 20 point penalty until one shows a balance again. So it’s easier just to leave a small balance on one for best score.

You should read the Scoring Primer linked at the top of my signature. You’re worried about CLD’s, I would be more worried about them paying them down slow and being balance chased rather than paying them all off and being done with it. JMHO.