Understanding which cards to use, and by how much

[Schmoopy]

Hey,

I'm a bit confused as for how credit usage works/effects your credit score.

I have the following 7 cards:

BofA 3 cards - Premium Rewards (CL $18K), Travel Rewards (CL $18K) and Platiunm Plus Mastercard (CL $2.6K).

Amex Gold

Target (CL $2K)

One Bank (CL $1.5K)

Wells Fargo Platinum Card (CL $6K)

If it were up to me, I'd just use 3 cards: BofA Premium, Travel and Amex (and a bit of Target when I shop there to get the 5% off).

Do I have to use the 4 other cards each month (I think I read that if you don't use them they are not calculated in the utilization percentage?) and if so, by how much? Is it also true that if you use, let's say, a card for $10, it doesn't count?

I also read here people are suggesting to pay off all the cards besides one before the posting date - so that got me even more confused as I'm thinking - so you don't need to use all cards?

I was planning to ask BofA to move the CL on the Platiunm Plus Mastercard to one of the other BofA cards as well.

Would appreciate suggestions what's the best way to approach this. Can I tuck 3 cards away in my drawer or not really?

Thank you!

[Ardecko]

You want to use each of your cards at least once a quarter, to keep the lender from cancelling them for non-usage. (Yes, you can tuck cards away, as long as you show the lender that you're still alive.)

If you're trying to maximize score, you can play the AZEO game, which I'm sure someone will soon swoop in and explain and condemn you for not currently doing. (AZEO is the extreme version of "don't show a balance on most of your cards.")

User the cards that get you the rewards or zero interest benefits you want. Pay them down often.

[Anonymous]

You do not need to use all of your cards every month.  As a best practice to avoid them being closed down on you for non-use, it's recommended to give them a swipe every 4-6 months or so.  All you have to do is use the card for a small purchase and immediately pay it off, then return it to the sock drawer for another 4-6 months.

Reported balances are what matters when it comes to utilization, not current balances at any given point in time.  Generally your reported balances will be your statement balances.  If you don't want a card to report a balance, make sure you pay off the entire current balance a few days before your next statement date.  Since you have 7 cards, for optimal FICO scoring you'll only want 1-2 of them to have a small reported balance at any given time.  Going with just 1 (known around here as AZEO) will ensure maximum scoring with respect to the [revolving] utilization sector of the pie.  

Actually using your cards more or less doesn't have an impact on your FICO scores.  It really all comes down to what those reported balances are. 

[Schmoopy]

Ok, got you. So the only issue is not having them cancelled but as long as they're open a $0 balance will still be calculated under my utilization % and not be ignored?

[Anonymous]

My comments in blue below.

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@Schmoopy wrote:

Hey,

I'm a bit confused as for how credit usage works/effects your credit score.

I have the following 7 cards:

BofA 3 cards - Premium Rewards (CL $18K), Travel Rewards (CL $18K) and Platiunm Plus Mastercard (CL $2.6K).

Amex Gold

Target (CL $2K)

One Bank (CL $1.5K)

Wells Fargo Platinum Card (CL $6K)

If it were up to me, I'd just use 3 cards: BofA Premium, Travel and Amex (and a bit of Target when I shop there to get the 5% off).

Do I have to use the 4 other cards each month.   No.  You should, however, use them once every six months to prevent them from being closed by the issuer due to inactivity. 

I think I read that if you don't use them they are not calculated in the utilization percentage?  That is not true. 

Is it also true that if you use, let's say, a card for $10, it doesn't count?  That is not true.  

I also read here people are suggesting to pay off all the cards besides one before the posting date - so that got me even more confused as I'm thinking - so you don't need to use all cards?  No, you don't need to use all the cards.

I was planning to ask BofA to move the CL on the Platiunm Plus Mastercard to one of the other BofA cards as well.

Would appreciate suggestions what's the best way to approach this. Can I tuck 3 cards away in my drawer or not really?   Yes you can.  Just be sure to take them out once every six months and use them for something small.

Thank you!

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PS.  Your Amex Gold is a charge card (not a credit card) and does not count toward your utilization.

[Anonymous]

That's correct.  $0 balance cards are still calculated into utilization.  Many people have a couple of high limit credit cards that they don't use or only use on occasion because their high limit helps drive down their overall utilization since you're adding dollars to the denominator (overall limits) but not the numerator (balances).  I've got a $30k Lowe's card for example that may see many months of non-use if I don't need anything for my house.  It sits at a $0 balance.  I usually have a need to use it every 3-4 months, but if I didn't I'd still give it a swipe for something I'd need anyway like a bag of charcoal or a pack of light bulbs just to ensure it doesn't get closed down for non-use.  In the meantime while sitting at a $0 balance I still receive the benefit of the additional $30k padding on my total limits which helps drive down aggregate utilization against the couple of balances that I do allow to report.

[Schmoopy]

Got it, ok, really important information. Guess couple of cards are going to the drawer until Easter/Passover or so

[Anonymous]

And if you put a recurring charge on a card, you can leave it in the sock drawer forever.  My BOA Better Balance Rewards hasn't been removed from the sock drawer for a couple years.