Utilization Ratio Question

[kango]

I had 20,000 in revolving debt on 10 cards but paid 9 of them off leaving 5,000 on one card.  Will this have a bigger possible impact on my score, having paid off multiple cards or was it better to have paid a portion on all the cards leaving the 5k across the cards?

[Anonymous]

Hi kango,

Welcome!  That's a significant paydown - congrats!!!

FICO looks at overall utilization as well as individual utilization.

They also look at number of accounts reporting a balance.  General consensus is to have less than half of all accounts reporting a balance for best FICO scores.

So, you're doing great in having only one revolving account report a balance.  FICO will look at your utilization reduction and the reduction in number of accounts reporting a balance.

It's hard to know what the very very best paydown would have been without knowing the CL's and balances on each card.  But it's all said and done, so enjoy the FICO benefits when the cards report.   What is the utilization on the one card that will be reporting the $5,000 balance?  And what is your new overall utilization?

And, where are you pulling your current scores from?  If you have a FICO score before the balances report, you can check the FICO score after the new balances to see the real FICO impact.  You might want to share - folks here love to see the results of paydowns! 

[IowaGuy]

Looks to me like you made a smart move.

Use em and pay em...before they report balance. carry a balance on a different card now and then so they keep account open.

[haulingthescoreup]

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@IowaGuy wrote:
Looks to me like you made a smart move.

Use em and pay em...before they report balance. carry a balance on a different card now and then so they keep account open.

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IME (in my experience), you don't even need to carry a balance. Just use each card once every 3 months or so. You can even pay it off before the statement drops and let it report $0 if you like. It's the usage, rather than the reporting, or carrying balances (aka paying interest), that keeps a card alive.