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The Truth about Credit Card Utilization

Frequent Contributor

Re: The Truth about Credit Card Utilization

How do scoring models treat personal lines of credit? Are they considered the same as bank credit card limits, or as retail credit limits?

Message 21 of 81
Established Contributor

Re: The Truth about Credit Card Utilization


@TXBlueBonnetwrote:

How do scoring models treat personal lines of credit? Are they considered the same as bank credit card limits, or as retail credit limits?


My overdraft protection reads as a line of credit, and is listed as a revolving account.  I think it counts as a bank credit card.

 

YMMV

Message 22 of 81
Member

Re: The Truth about Credit Card Utilization

They doubled your credit limit? care to say which card it was? I am trying to double my limit and transfer a balance. 

Message 23 of 81
Established Member

Re: The Truth about Credit Card Utilization

Just to be clear... If I am someone who PIF each month on my cards, any decline in my FICO because of a month of entering a higher UTIL bracket would be only temporary, right?  My score will bounce  back to previous score when I return to the ideal UTIL rate?

 

 (What I am kinda considering is pushing my little Cap One $300 Platinum usage up for a few months, based on the many comments I've read that Cap One likes to see you actually using their cards, if you want to get an upgrade or CLI. And my 6 month review, or whatever, is in a few months.)

FICO 8: EQ 711 ⎥TU 716 ⎥EX 720 (May 2018)
Aug 2017: Open Sky (Capital Bank) Secured Card $500 (My first CC in 20 years.)
Dec. 2017: Cap One Platinum $300
Mar. 2018: NFCU Cash Rewards $1700
May 2018: Cap One QS $1300
Message 24 of 81
Community Leader
Super Contributor

Re: The Truth about Credit Card Utilization


@-KC-wrote:

Just to be clear... If I am someone who PIF each month on my cards, any decline in my FICO because of a month of entering a higher UTIL bracket would be only temporary, right?  My score will bounce  back to previous score when I return to the ideal UTIL rate?

 

 (What I am kinda considering is pushing my little Cap One $300 Platinum usage up for a few months, based on the many comments I've read that Cap One likes to see you actually using their cards, if you want to get an upgrade or CLI. And my 6 month review, or whatever, is in a few months.)


 

Yes, FICO penalties related to utilization are a pure snapshot in time.  Therefore, any such penalty vanishes once the revolving balances become ideal a few months later.

 

You mention a plan to raise your usage on the small CL Cap One card.  You mean utilization right?   You could use that card a lot more (raise your spending on it to $1000 per month) and still keep the reported utilization in the 2-5% range. 

 

I know very little about CLI strategies but I can imagine that having a bit higher individual utilization on the card in question could increase a person's chances of success.  Someone posted about an internal memorandum from Wells Fargo a long while back that implied that the sweet spot they looked for was 21-28% on that individual card -- much more than that and the customer looked risky, but less and they looked like they didn't need a CLI.

 

Based on your reading, what are you aiming for with the Cap One card?

 

PS.  An individul utilization of < 29% should have no impact (even a temporary one) on your score, as long as the total util stays in the 1-8% ballpark.

Message 25 of 81
Established Member

Re: The Truth about Credit Card Utilization

Thanks for the reply, CGID. I have read your advice a lot around these boards.  

 

EDIT:  I had a long reply here, but I have since looked around a bit and realized that my query was answered among the threads here, including in the one linked below.   I was wondering if I could have my cake and eat it too--use a card heavily, yet PIF before statement cut date, to keep reported UTIL low.

 

I had used the term USAGE because I was distinguishing that from the UTIL calculated by FICO based on one's balances at the statement date.  I now understand that it is indeed a strategy to use a card heavily (to make the CCC happy, when seeking a CLI), and yet pay balance way down, or PIF, before statement cut date, in order to keep one's UTIL rate low.

 

I also see your advice to be smart about not losing one's head and charging a card up with things one wouldn't necessarily buy, simply in order to chase a possible CLI, in this thread:

 

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Does-utilization-matter-before-statement/...

 

FICO 8: EQ 711 ⎥TU 716 ⎥EX 720 (May 2018)
Aug 2017: Open Sky (Capital Bank) Secured Card $500 (My first CC in 20 years.)
Dec. 2017: Cap One Platinum $300
Mar. 2018: NFCU Cash Rewards $1700
May 2018: Cap One QS $1300
Message 26 of 81
New Member

Re: The Truth about Credit Card Utilization

Quick Question:  In your research, have you found that AU's are factored/weighted differently?

 

Message 27 of 81
Community Leader
Super Contributor

Re: The Truth about Credit Card Utilization


@TAJAHS77 wrote:

Quick Question:  In your research, have you found that AU's are factored/weighted differently?

 


Yep.  An AU card is sometimes treated just the same as a tradeline of your own, but sometimes it is not (even ignored completely) and whether it will be or not is a crap shoot.

 

The old mortgage models are much more likely to count every AU tradeline as no different from a tradeline of your own.  FICO 8 and 9 are very unreliable and might or might not.

 

The best way to use AU accounts (from a purely credit scoring perspective) is as follows:

 

Do not add AU accounts if:

 

* You are chiefly trying to help your utilization.  First off the AU card might not help.  But also such a strategy means you are not able to control spending.  The correct way to control utilization is to pay down your debt.  You can spend a lot, have only one card with a $500 limit, and still have a 1% utilization.

 

Consider adding an AU card if all of the following are true:

 

*  The AU card is much much older than your oldest account.  (Example: your oldest account is 1 year old, the AU card is 15 years old).

 

*  The AU card has no lates on it anywhere and you are confident that the owner will never be late.

 

*  The owner will keep it under 8% utilization -- keeping it reporting $0 is best.

 

*  The CC issuer has a policy of giving the AU account the same old "Date Opened" as the original cardholder.

 

In other words, an AU strategy is best used to artificially obtain a much older credit history (Age of Oldest Account).  If the AU account isn't getting you that, or has significant balances or any derogs, it's useless or even harmful.

 

If you do find an AU card that meets all those conditions, you can try adding it.  Make sure your utilization is already ultralow beforehand.  If the AU card gives you a big FICO 8 boost, it means FICO 8 is treating it as a real account.

Message 28 of 81
Valued Member

Re: The Truth about Credit Card Utilization

 
Starting Score: 669
Current Score: 773
Goal Score: 850


Take the myFICO Fitness Challenge
Message 29 of 81
Valued Member

Re: The Truth about Credit Card Utilization

Wish I could slam that post with 100 Kudos! Very very very awesome read! You hit a grand slam sir!

 

Now, if by chance youre still around these parts - TU 669 99%/95% utlization on 2 cards....Just paid both off leaving balances at $50 or so on each $1k limit card.... No derogs, lates, negs. something like 6 year AAOA...

 

What will i see tomorrow in way of a score jump? The Myfico simulator says 669 > 799, have a guess for me?

Starting Score: 669
Current Score: 773
Goal Score: 850


Take the myFICO Fitness Challenge
Message 30 of 81