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