Total Utilization/Individual utilization and some deleted lates questions

[BCH]

When applying for a mortgage, the lender told me my score was 605.  I had paid several cards down to 7%, but had my largest at 78%. (Total utilization was 39%, assuming all other paid down balances had actually reported my the time credit was pulled)  I have some lates reporting on my line of credit (usbank), and had an $83 medical collection post about 2 months ago.  I was able to get my largest card to remove all my lates.  I also paid it to 7%.  I paid the medical collection, but the refuse to delete.  All these changes got sent electronically on Friday.  So my total utilization is at 7% and 3 revolving cards and a line of credit are all right about 7%.  Plus one trade line cleaned up.  Two of the other cards haven't had lates in the last year, and my student loan has been on automatic payments for the last year, so no lates.  So only USBank will be reporting any lates. Plus my one paid in full medical collection of $83.  

I need to re pull my credit on Tuesday with the lender so it is within the 14 day mortgage window.  I am sure it has to be above 620, but he initially wanted 700 because of it being in house and slightly untraditional.  Since everything got transmitted on Tuesday, I am thinking about paying for the MyFico 19 score report on Sunday or Monday.  I don't know which Fico model he uses, but would feel much better knowing everything was at least reflecting correct balances.  A few questions:

if TSI didn't report the collection as Medical, should I send in the medical bill for that account?  I'm understanding that the medical collections aren't suppose to effect your score?  

After apporval, should I pay a few balances to $0?  Again I have 3 revolving cards and one line of credit.  If I CAN be at 700 before closing, my rate will be MUCH better!

any guess what the improved utilization and improved trade line would do to my 605 score?  I do think that if that collection hadn't of snuck on there that I would've been fine, but since I was below 620, I am really stressing!  (This is also a local bank, so very embarrassing!)

[Anonymous]

You mention a number of things.  Here are my thoughts.

"I don't know which Fico model [my mortage lender] uses,..."

The scores used by almost all mortgage lenders are:

• Experian FICO Score 2  (also known as EX-98 or Risk Model v2)
• Transunion FICO Score 4  (also known as TU-04 or Transunion FICO Risk Score Classic 04)
• Equifax FICO Score 5  (also known as EQ-04 or Beacon 5).

These use older FICO models than the FICO 8 model one sees in many credit monitoring services.  If you ask your lender, I can't imagine that he wouldn't tell you whether these are the scores he uses.

It sounds like you are interested in seeing whether a number of changes have been made to your credit REPORTS.   Great idea.  A free tool that will give you your EQ and TU reports is Credit Karma (you can ignore the scores provided by Karma).  I suggest you enroll and download your reports and go through them with a fine tooth comb.  Continue to work with creditors so that you can get your reports as clean as possible.  There are some other tools that give you access to credit reports -- I think Credit Check Total may do that.

As far as your credit cards, you want all of them to have a zero balance except one.  The one that reports a positive balance should be fairly small (but at least $5) and your total Util should be at < 1%.

As far as the medical collection goes, it is true that FICO announced plans to be much more forgiving about paid medical debt.  It is quite possible, however, that this only affects the latest FICO models, and that therefore the old models (which mortgage lenders use) might still view this as heavily as they ever did.  I suggest you talk to other people on the forum about this to be sure.

[BCH]

Credit guy-thank you.  Yes, I do need to get the mortgage right away...I think that small medical collection through my score for a loop! It is also possible that some of the accounts were showing near full utilization if they hadn't updated.  Y largest did still have 77% uti as I was hoping not to pay it as it was 0%.  I'm sure dropping that card from 77% to just under 6% AND my total uti from almost 0% to 7% had to help!,  as did removing at least 3 late fees on that card...that had to get me to my 620 minimum.  I really need to be closer to 70..I would be happy with 680 by closing.  Unfortunately, I don't have time to mess with disputes, but the only thing in the last 12 months would probably be USBank.  (And that Stupid collection..I was actually disputing the hospitals $1,000 emergency room charge...didn't realize this billed separately!). Everything else is at least 12 months old.  I can pay my line of credit to 0% on the 15th and my othe card closes about the 23rd, and I can pay that to 0%...I guess it will have to be a negative balance to account for interest?  I thought the old rule of thumb was 7% for the sweet spot....guess I probably won't make 1% before closing!

does credit karma show the updates as quickly as if I ran a free credit bureau report?  

I had had read that medical collections would fall off...but I need to see if it even shows as medical...I had also read medical collections under $100 that were paid didn't effect it.  I guess it could be worse!

[Anonymous]

As far as the medical collection:

See if you can get some more knowledgeable people on the Forum to chime in here.  The google searches I have done (medical collections FICO mortgage) seem to suggest that FICO is altering the harsh way it viewed medical debt in future models.  But the mortgage scores are based on very old models.  So it is by no means clear to me that your medical collection (if paid) will be ignored (or that collections less than $100 will be ignored).  I don't have a dog in that particular race so I have never bothered to find out exactly how it works.

Credit cards:

Remember that it is very important for ONE of your cards to report a positive balance.  You will get hurt if all your cards are at zero..  But no, 7% is not a particular sweet spot.  In general, the lower the better as far as total utilization goes (as long as you are not at 0%).  But your scores should have improved a lot by lowering your debt from that high figure to a much lower one.

Good luck.

[BCH]

Credit guy- thank you very much!  I wish I would've read this forum before, because two of my accounts are sitting at $200 (7%).  I could've paid them off, but thought that would actually hurt me.  I have read on other sites that 7% is the sweet spot, so that's what I was shooting for.  So by the end of the month, I can have those two small accounts at $0.  I will have to find a way to pay more than the balance to account for interest....is there a penalty for having a negative balance?

i posted the medical collections on rebuilding your credit.  Hopefully someone there has an answer of if I helped myself at all paying the account.  Of course, I think regardless of a score boost, I would've had to pay it off to get the mortgage, so I can bombard them with delete requests later.

[Thomas_Thumb]

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@Anonymous wrote:

Credit cards:

Remember that it is very important for ONE of your cards to report a positive balance.  You will get hurt if all your cards are at zero..  But no, 7% is not a particular sweet spot.  In general, the lower the better as far as total utilization goes (as long as you are not at 0%).  But your scores should have improved a lot by lowering your debt from that high figure to a much lower one.

Good luck.

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To the best of my knowledge, I have had no score shift associated with maintaining aggregate utilization anywhere in the 1% to 6% range. A mandate to achieve a 1% or 2% UT threshold can create unnecessary hardship and stress for no real gain. Anywhere in the 1% to 9% aggregate utilization range IS commendable and even reason statements reference 6% for high achievers.

For those that do report a point change going from 7% to 2% or 1% , I wonder if other factors are in play - such as # cards reporting a non zero balance.

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@BCH wrote:

Credit guy- thank you very much!  I wish I would've read this forum before, because two of my accounts are sitting at $200 (7%).  I could've paid them off, but thought that would actually hurt me.  I have read on other sites that 7% is the sweet spot, so that's what I was shooting for.  So by the end of the month, I can have those two small accounts at $0.  I will have to find a way to pay more than the balance to account for interest....is there a penalty for having a negative balance?

i posted the medical collections on rebuilding your credit.  Hopefully someone there has an answer of if I helped myself at all paying the account.  Of course, I think regardless of a score boost, I would've had to pay it off to get the mortgage, so I can bombard them with delete requests later.

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There is no penalty for a negative balance in my experiences. I had this happen a few times when credits for returns came through. One CC company sent me a check for the "over payment", a couple others just maintained the negative balance and later used it to offset new charges.

[Anonymous]

Hi TT.  Ordinarily I would agree with you, if the situation were giving general advice that would apply to all people. 

But this guy is in a different situation.  His original post indicated a complete willingness to pay all of his cards down to $0.  So I could see that it must not be a hardship for him.  Furthermore it was clear that he had an incredibly tight timeframe and an interest in knowing only a very simple practical bottom-line instruction about what he can do to maximize his score (as far as CC debt).  The simplest thing to tell him (given all that) was what I told him: pay all of your cards down to $0 except one and keep that one pretty low.

He followed up and asked if I was sure: he had been told 7% was a sweet spot (i.e. better than 2% or 3% and also better than 11%).  My response was geared toward correcting that mistaken idea.  At this point it will be much more work for him to try to make sure he keeps his CC debt right around 7% than what I suggested.  Again, remember that for this guy, he just needs to know a very simple rule that he can execute in a matter of days.

That said, I agree with you that I personally haven't seen a lot of difference between 1-6% (though I have never carefully tested it).  What I am certain of is that 1% is not worse than anything else in the 1-6% range.

[Anonymous]

I have been carefully testing utilizations below 9% against FICO 8

7-8% seems to be good

another small boost occurs for me below 4.5%

no boost at 2%

about to try below 2% or maybe an ultra low like $2-$5 next week

I have some events coming up that will cloud the testing next month

my report is not clean, YMMV based upon your report

[Anonymous]

Hello Inverse!  Interesting that you get some benefit from going from 7% to a few percent lower.

Anytime one is testing one very narrow specific scoring factor, even a very important one like total CC utilization, it's important to make sure you are, as best you can, isolating that particular factor.  For example, as you go from 7.5% to 4.5% to 1.5% to 0.5%, it's crucial to make sure that the number of credit cards that were reporting zero each time are documented as well.  Ideally the number of zero-balance cards needs to be held constant.  (TT raises this point and I agree with him 100%.)  Likewise, because the shift can sometimes take 30 days to materialize, it's important to see if there is anything else happening around that time that could induce a score shift (even subtle things like an inquiry or a CC turning one year old or one's AAoA crossing into a new integer value).

As far as testing low and ultra low numbers, I would make a distinction between ultra-ULTRA low numbers (like $1.50) and slightly higher numbers like $6 or more.  I say that because I believe some people on the forum have (rarely) reported getting their total U rendered as 0% when the non-zero amount is preposterously low.  (Less than the price of a Big Mac, say.)   I know that BOA, for example, is doing some stuff where they sometimes treat ultra-ultra-small balances as zero.

So for me, I almost think of the following as different test scenarios:

     approx 0.4% of one's total U (and over $20)

     roughly $6

     roughly 80 cents

In theory they are all supposed to be rounded up to 1%, but if any one of them causes a 0% Util I would be almost sure it would be the last one, never the first two.

Note to BCH (our original poster):

As you can see, a few of us are using your thread as a jumping off place to discuss some general theories about where that fabled sweet spot is for overall credit card utilization goes.  You seemed very focused on the ultra practical question of what you should do.  I think all three of us (TomThumb, Inverse, myself) would tell you that as long as it doesn't pose you any financial hardship, you should be fine with paying your total credit card debt down to maybe $20 or so.  That will give you a total U of 1% after rounding.  Likewise you would be probably just as fine with 2%.  But it is very important to get all your CC's reporting at $0 except one, since you need every available extra point on your FICO score.

[Anonymous]

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@Anonymous wrote:

Hello Inverse!  Interesting that you get some benefit from going from 7% to a few percent lower.

Anytime one is testing one very narrow specific scoring factor, even a very important one like total CC utilization, it's important to make sure you are, as best you can, isolating that particular factor.  For example, as you go from 7.5% to 4.5% to 1.5% to 0.5%, it's crucial to make sure that the number of credit cards that were reporting zero each time are documented as well.  Ideally the number of zero-balance cards needs to be held constant.  (TT raises this point and I agree with him 100%.)  Likewise, because the shift can sometimes take 30 days to materialize, it's important to see if there is anything else happening around that time that could induce a score shift (even subtle things like an inquiry or a CC turning one year old or one's AAoA crossing into a new integer value).

As far as testing low and ultra low numbers, I would make a distinction between ultra-ULTRA low numbers (like $1.50) and slightly higher numbers like $6 or more.  I say that because I believe some people on the forum have (rarely) reported getting their total U rendered as 0% when the non-zero amount is preposterously low.  (Less than the price of a Big Mac, say.)   I know that BOA, for example, is doing some stuff where they sometimes treat ultra-ultra-small balances as zero.

So for me, I almost think of the following as different test scenarios:

     approx 0.4% of one's total U (and over $20)

     roughly $6

     roughly 80 cents

In theory they are all supposed to be rounded up to 1%, but if any one of them causes a 0% Util I would be almost sure it would be the last one, never the first two.

Note to BCH (our original poster):

As you can see, a few of us are using your thread as a jumping off place to discuss some general theories about where that fabled sweet spot is for overall credit card utilization goes.  You seemed very focused on the ultra practical question of what you should do.  I think all three of us (TomThumb, Inverse, myself) would tell you that as long as it doesn't pose you any financial hardship, you should be fine with paying your total credit card debt down to maybe $20 or so.  That will give you a total U of 1% after rounding.  Likewise you would be probably just as fine with 2%.  But it is very important to get all your CC's reporting at $0 except one, since you need every available extra point on your FICO score.

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I'm a trained mathematician and while not completely rigorous, the contstraints were good on my testing.  I have a very stable profile due to my baddies and my installment balances were not hovering around any hypothetical steps.  You can find the thread here: http://ficoforums.myfico.com/t5/General-Credit-Topics/Simulator-pay-down-revolving-test/m-p/4146154#M213009

On that other forum, the magical number for many is $2 to avoid it being dropped to $0. And is well documented if you care to read it.

I am with TT, in particular when it comes to mortgage scores, review of my simulator testing shows that the mortgage scores do not respond to anything less than 7%.  There is some indication on that other forum that EQ 04 and to a much lesser extent EX 98 may respond to reporting $2 on a single card. I would even go further to say, if the algorithm is using a series of partial differential equations to solve the credit score, the boundary condition of outstanding revolving debt = $0 is an issue with the model and therefore revolving debt > $0 just makes it work better.