The Utilization Factor

[credit_endurance]

I am trying to get a "real" understanding of how Utilization works. My scores have been pretty inconsistent almost stagnant lately. Fluctuations back and forth depending on how many balances are reporting on different cards. My current Utilization is low at around 5% for the available credit I currently have but my scores aren't really rising nor are they dropping very fast. So my question would be is it better to carry a "higher" balance on just 1 credit card? Or is it better to have the balances spread around between several credit cards?

[austinguy907]

Just my observation when I rotate through cards to keep things active.  I have 10 accounts and typically have a balance report on 2 of them consistently since I don't play games with payments and just let the statement cut and autopay the balance.

When I have 3 cards report a balance it's negligible difference in points. If they happen to overlap with 4 then it's a bit more noticeable going from 1-2 points to maybe 10.  So, the more cards that have a balance no matter how little it is makes a difference.  The balance I shuffle from card to card is usually about $25/mo for a cell phone bill.  So, it's not shifting utlization at all at that level but, it's showing up as some use on an additional card.  

Some say individual vs total utilization is factored in differently or somehow a 40% balance on one card and 10% on the other is equal to 20% overall.  I personally just keep each card under 5% and not spend too much time thinking about it anymore.  If you're working on your scores though it becomes a bit more of a priority to keep track of to try to get that high from the next approval or maybe you're gearing up for a mortgage and only 5 points away from the next rate break point.  

If you're not looking to extend yourself into something where it makes a long term difference in interest then it's probably best to just keep it in line with what you can handle reasonably.  If you can't PIF then set a goal of no more than 3 months.  

[credit_endurance]

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@austinguy907 wrote:

Just my observation when I rotate through cards to keep things active.  I have 10 accounts and typically have a balance report on 2 of them consistently since I don't play games with payments and just let the statement cut and autopay the balance.

When I have 3 cards report a balance it's negligible difference in points. If they happen to overlap with 4 then it's a bit more noticeable going from 1-2 points to maybe 10.  So, the more cards that have a balance no matter how little it is makes a difference.  The balance I shuffle from card to card is usually about $25/mo for a cell phone bill.  So, it's not shifting utlization at all at that level but, it's showing up as some use on an additional card.  

Some say individual vs total utilization is factored in differently or somehow a 40% balance on one card and 10% on the other is equal to 20% overall.  I personally just keep each card under 5% and not spend too much time thinking about it anymore.  If you're working on your scores though it becomes a bit more of a priority to keep track of to try to get that high from the next approval or maybe you're gearing up for a mortgage and only 5 points away from the next rate break point.  

If you're not looking to extend yourself into something where it makes a long term difference in interest then it's probably best to just keep it in line with what you can handle reasonably.  If you can't PIF then set a goal of no more than 3 months.  

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Thanks austinguy! Great points and advice. I often wonder what it would be like to manage some much credit line as many have obtained and never would have thought that I would be in a similar position someday myself. I currently have around 7 cards reporting balances with the highest being $4,300 and lowest around $10.00 the effect this has between credit reports is noticeable with Transunion being effected the least Equifax minimum and Experian the most for some reason. Over the last 3 months I have applied for around 4 credit cards and a ploc which have all reported so that could be a factor in my fluctuation of scores as well. I just find it very tedious to try NOT to use my credit to keep scores on the rise are at worst steady flowing. I do eventually want to obtain a mortgage so in the mean time I will just continue to use my credit wisely and PIF when possible and maybe cut it down to no more than 3 credit cards in usage as you explained. Thanks again

[austinguy907]

It can be consuming when you're ramping up your scores to where you want them to be.  The key to it now is to just stop applyng and concentrate more on growing what's in your pocket now.  CLI's can be just as exciting as an approval since it's still an approval w/o having to wait for it to arrive in the mail.  This time 2018 you should safely be in the mid 7's for scores with things aging a bit and showing more history.  Time is the hidden factor in scoring that isn't really "scored" but makes some of the biggest differences in scores.  Now is probably time to start considering Quality over Quantity since you're hitting the 200K mark in TCL.  Another goal is to watch those inquiries start dropping off and seeing a point or two added to your scores.  

[SouthJamaica]

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@credit_endurance wrote:

I am trying to get a "real" understanding of how Utilization works. My scores have been pretty inconsistent almost stagnant lately. Fluctuations back and forth depending on how many balances are reporting on different cards. My current Utilization is low at around 5% for the available credit I currently have but my scores aren't really rising nor are they dropping very fast. So my question would be is it better to carry a "higher" balance on just 1 credit card? Or is it better to have the balances spread around between several credit cards?

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From my experience optimum credit card utilization principles are:

1. Let less than a third of your cards report balances, with others reporting zero.

2. Keep overall utilization at 2% or less.

3. Let no single card report utilization over 29%.

Conventional wisdom is that super-optimization would result when

1. 1 card reports a balance of 9% or less

2. All other cards report zero balance

[credit_endurance]

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@SouthJamaica wrote:

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@credit_endurance wrote:

I am trying to get a "real" understanding of how Utilization works. My scores have been pretty inconsistent almost stagnant lately. Fluctuations back and forth depending on how many balances are reporting on different cards. My current Utilization is low at around 5% for the available credit I currently have but my scores aren't really rising nor are they dropping very fast. So my question would be is it better to carry a "higher" balance on just 1 credit card? Or is it better to have the balances spread around between several credit cards?

---

From my experience optimum credit card utilization principles are:

1. Let less than a third of your cards report balances, with others reporting zero.

2. Keep overall utilization at 2% or less.

3. Let no single card report utilization over 29%.

Conventional wisdom is that super-optimization would result when

1. 1 card reports a balance of 9% or less

2. All other cards report zero balance

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Thanks SouthJamaica for your insight. I know I have several of my cards reporting a balance. Probably 6-8 or so. TU doesn't seem to mind but EX really takes a hit if several are reporting. I'm at around 5-7% utilization across the board so there is room there for improvement. I have to check to see if any of my cards are reporting more than 29-30% I will try to prioritize one card with my largest credit line to keep utilization around 9% but I will admit it will be tough to maintain this strategy.

[Anonymous]

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@credit_endurance wrote:

I will admit it will be tough to maintain this strategy.

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If you can tell us the total number credit cards you have, the folks here can help you find a solution that will fit your style and be easy to maintain.

[credit_endurance]

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@Anonymous wrote:

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@credit_endurance wrote:

I will admit it will be tough to maintain this strategy.

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If you can tell us the total number credit cards you have, the folks here can help you find a solution that will fit your style and be easy to maintain.

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I currently have 20 cards reporting I know alot! I'm in the process of fine tuning some things and will probably close 3 or 4 of them shortly. And will be requesting to shift credit lines over to other cards to increase their limits.

[Anonymous]

Your plans to get rid of cards that you don't like and combining credit limits sounds smart.

Are you paying them in full each month?  As I read back through tour posts I see that you have some cards with a balance of > $4000.  That sounds like a lot.

[credit_endurance]

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@Anonymous wrote:

Your plans to get rid of cards that you don't like and combining credit limits sounds smart.

Are you paying them in full each month?  As I read back through tour posts I see that you have some cards with a balance of > $4000.  That sounds like a lot.

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The $4,000 balance is on my PenFed Platinum Visa. I did some balance transfers on it late last year that brought it to that balance and have been paying around $200 a month on it. I also have a Pen fed promise visa that has $15k on it that I plan to close and shift that balance over to the platinum visa to increase the limit and further cushion the utlization on that card is this a good move? And also is it wise to take advantage of BT offers to pay down cards or is it best to just PIF? Guess my goal would be to just have one high limit card reporting low utilization even though the amount owing is a little substantial instead of several cards reporting low balances. Cards reporting balances as follows:

                  Pen fed Plat $4,300 of $20,000

                  Barclays $1,061 of $7,500

                  Nay Federal Gorewars$2,017 of $17,500

                  Navy Frederic Plat $436.00 of $2,000

                  Amazon Prime $10.00 of $6,000