Utilization Ratio

[Anonymous]

For scoring, do they look at each credit card or total or even both?  My example:

We use a Discover Card to put ALL expenses on to get the cash back bonus.  Our utilization ratio for this card is high, probably around 30-some percent on average and can be over 50% sometimes.  It has a 7,000 limit.

We also have another Discover Card that we use just for gas.  It has a 7,500 limit and our utilization ratio is probably like 8%.

Also a Scheels card with a 15,000 limit.  This card rarely has a balance but I do use it from time to time.

Also a Gander Mountain card with a 7,000 limit, usage is just like the Scheels card.

Soooo, my total limit is 36,500.

If they just look at the total than I'm sitting good at around 10%.  If they look at each card they will see our main Discover card and see it's sometimes 30-50% or more.

How do they actually look at this?  I called Discover Card last night to raise my main card's limit but they wouldn't because I already have a 14.5k total limit with them and I'm only using like 1/3 of it on a normal month. 

Any suggestions?  Looking to build a house next year and want my score to be HIGH.  Thanks

PS We pay off our cards every month and have never paid 1 dime of interest (if that matters)

[haulingthescoreup]

Hi, welcome to the forums!

The scoring formulas look at both individual util and at total util, so it's wise to keep both under control.

Since you PIF (pay in full), consider paying all but one of your cards off right before the statement posts. That way, those will report $0. On the remaining card, pay all but $10-20, let that report, then pay it off. (Easy to forget to do, btw...)

This is tedious to do at first, but after a while, you just start to think of your statement dates as your new due dates. The two Discover cards update your statement balances. On the other two, you can compare your statement balances with what's on your credit reports to see if that's when they report as well.

There's no need to do this unless you want to maximize your scores, but it definitely works.

[Anonymous]

I too have the same issue... that's a great trick. Thanks for sharing!

[Anonymous]

So pay off the majority of balance before the statement comes out?

I'll have to check on that.  I normally don't pay the balance until the very last day due to the fact I'm earning 4.25% with my checking account.  If I pay it off right away it seems like I'd lose a months worth of interest.

[haulingthescoreup]

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@Anonymous wrote:

So pay off the majority of balance before the statement comes out?

I'll have to check on that.  I normally don't pay the balance until the very last day due to the fact I'm earning 4.25% with my checking account.  If I pay it off right away it seems like I'd lose a months worth of interest.

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For optimum scoring, pay off ALL the balance, except on one card.

For most people, this might cost maybe a buck-severnty-five a year in lost interest.

For you, since you have some big balances and you actually get real interest in the meantime, you'll have to decide what's best.

The good thing is that it only takes one billing cycle per card to do this to max your scores. So you can do what you're doing now until say two months before you get scores pulled for a mortgage. You'll need to let each card update the $0 balance, plus allow up to 2 weeks to be safe for all three reports to post the new balances.

As soon as the new balances are in, a pulled score will show the lowered util --> higher scores.

[Anonymous]

Sounds good.  I'll keep doing what I'm doing until a couple months before I want to do anything major.  thx for your time