Utilization Question - Single Card vs Multiple

[Anonymous]

Hello all,

So the question I have is, what hits a fico more; having a single card over 75% utilization but multiple other cards at or near zero, or spreading the balances out among many cards? What if those other cards charge far higher interest rates?

[SouthJamaica]

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@Anonymous wrote:

Hello all,

So the question I have is, what hits a fico more; having a single card over 75% utilization but multiple other cards at or near zero, or spreading the balances out among many cards? What if those other cards charge far higher interest rates?

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1. FICO is indifferent to the interest rates. It doesn't give you points for financial astuteness in getting a lower interest rate or even zero interest.

2. My impression is that overall percentage utilization is a bigger point factor than individual percentage utilization in FiCO 8, but they both count. In my experience 29-30% is an important breakpoint in individual utilization, so I would try to limit any individual account to 28% or less.

[Anonymous]

Spreading it out might get you some points but not worth paying more interest, finances always come first unless you got a mortgage application coming up, which still puts finances first.

[Revelate]

Probably scorecard dependant, so YMMV.

For me, I'd rather be carrying it all on a single line at the lowest APR possible: financial win to Oldman's point.

It's probably going to be your best scoring decision too underneath the 80% line (or 90%, I really hate revolving datapoints which come in all over the place, less is better though, nuff said).

[NRB525]

Take the lower interest cost option first, because it gives you a better chance to pay off that debt.

FICO score is second to hard dollar financial decisions.

[Anonymous]

Okay thank you all for the advice!

I have one other question.. if the card utilization is under 8.9% but still has a balance, does it ding the FICO?

[Revelate]

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@Anonymous wrote:
Okay thank you all for the advice!

I have one other question.. if the card utilization is under 8.9% but still has a balance, does it ding the FICO?

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Different part of the algorithm measures number of revolvers (or number of accounts in some models).  Fewer is better, most but not all $0 FTW.

[Anonymous]

So you are saying that it would be a little better to just pay that card to 0 rather than keep a small balance?

[Revelate]

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@Anonymous wrote:

So you are saying that it would be a little better to just pay that card to 0 rather than keep a small balance?

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Optimal is 1 card with a small balance on it, national bank card ideal, when we're talking FICO scoring.  That works for any file and any model, certainly any file with 3+ tradelines.

You don't want all credit cards at zero as there's a penalty for "no recent activity on a revolving tradeline" but ultimately the more at $0 you have the better off you are from a scoring perspective.

[Thomas_Thumb]

If you are carrying a sizeable balance, there are situations where splitting a balance amoung two cards is better score wise than having the entire balance ope one card - especially for Fico 8.

For example, If you have 4 cards with $500 CL per card and a total balance of $450 it would be better to split the $450 evenly between 2 cards as opposed to having the entire balance on one card.

1) $450 on one card => 90% card utilization (substantial score penalty)

2) $225 on each of 2 cards => 45% card utilizations (small score penalty)

In both the above cases aggregate utilization is 22.5%