Utilization question - UPDATE!

[Rikku]

I'm new to credit score monitoring and thought I understood how to maximize your score by letting the best amount of utilization report each month. Basically, you make sure that one card reports a balance of between 1-10% of the total credit limit, and all other cards report zero balance, riiiight?

I lost five points by letting a 2.9% balance report this month on one card. My other cards all have zero balances and there weren't any other changes to my CR. It was a Scorewatch alert. Can someone help me to understand this? I expected to gain a few points by letting a small balance report, as my utilization has previously been reported as zero. Did I do the math wrong?

The specifics:

• I joined the boards and learned about credit scoring in Sept. My EQ was at 729, but there was an inaccurate negative on my CR. I disputed this information and it was removed. My score went up to 790. I had two CCs and both reported zero balance that month.
• In Oct, I decided to try letting a balance report to see if my score would go up a couple of points. I let a $20 balance report on a CC that has a 1K limit, so my utilization was .2% for that card. My second CC had a zero balance on a 2K CL. I opened a third CC that month and was given a 25K CL, zero balance reported in Oct. My EQ score went up to 794 when the $20 balance reported for Oct.
• This month, I let a $735 balance report on the CC with the 25K limit. No balance reported on the other two CCs. If I did the math right, my utilization for that card is 2.9% for Nov, which is within the 1-10% range - but my score dropped from 794 to 789.

I know that my score is good regardless and it's only five points, but I want to understand WHY. Did I screw up the math when calculating my utilization? (Definitely possible, as math isn't my greatest strength - but I thought it was reported balance divided by credit limit, right?) Or did I get dinged for letting a larger balance report than I have routinely done in the past? Or is the balance on the higher CLI card being compared to the lower CL cards?

[DaveSignal]

It could because of the new account that you just opened. I wouldn't worry about it though, since your scores are excellent. You should play around with the balances though, to see if it makes a difference. The scoring effect is different depending on the credit profile being scored. Some people have a 'sweet spot' somewhere between 1 and 10 % utilization. For me, anywhere for 1 to 10% makes no difference at all, but above 10% and my score starts to fall. I am in a different bucket though, as I still have baddies on my reports.

[lhcole77]

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@DaveSignal wrote:
It could because of the new account that you just opened. I wouldn't worry about it though, since your scores are excellent. You should play around with the balances though, to see if it makes a difference. The scoring effect is different depending on the credit profile being scored. Some people have a 'sweet spot' somewhere between 1 and 10 % utilization. For me, anywhere for 1 to 10% makes no difference at all, but above 10% and my score starts to fall. I am in a different bucket though, as I still have baddies on my reports.

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+1

Did your new card show up on your October report? Or did it first appear in November?

[Rikku]

Thanks for the response, Dave - I considered that it might be from the new account. The only other thing I can think of is that even though my utilization is low on that card, the reported balance is quite a bit higher than it has been in previous months. I think I'm going to try letting a lower balance ($100 or so) report on that card next month and see what happens! Maybe I just need to find my happy spot.

[Rikku]

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@lhcole77 wrote:

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@DaveSignal wrote:
It could because of the new account that you just opened. I wouldn't worry about it though, since your scores are excellent. You should play around with the balances though, to see if it makes a difference. The scoring effect is different depending on the credit profile being scored. Some people have a 'sweet spot' somewhere between 1 and 10 % utilization. For me, anywhere for 1 to 10% makes no difference at all, but above 10% and my score starts to fall. I am in a different bucket though, as I still have baddies on my reports.

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+1

Did your new card show up on your October report? Or did it first appear in November?

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Yes, it reported in Oct with a zero balance. The account hit my reports early in the month (the 5th or so) and the first statement was on the 15th. I don't think I had even had a chance to use it yet.

[Rikku]

For anyone who is following along at home, I figured it out!  I just got another Scorewatch alert and my score is back to 794. Since I had one card reporting a balance in Oct and a different card reporting a balance in Nov, there was a week overlap before the card from last month reported a zero balance this month. It looks like the 5-point drop was a result of two cards reporting small balances. Good to know!

[Kratos-TM]

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@Rikku wrote:

For anyone who is following along at home, I figured it out!  I just got another Scorewatch alert and my score is back to 794. Since I had one card reporting a balance in Oct and a different card reporting a balance in Nov, there was a week overlap before the card from last month reported a zero balance this month. It looks like the 5-point drop was a result of two cards reporting small balances. Good to know!

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Good catch! If you had not caught that, you would have thought you needed to zero everything out.

That's why I've learned that in order to play this credit game accurately, we can't casually look for changes......you really have to study it closely to get the full understanding. Having access to these reports daily or monthly is money well spent!

[Rikku]

I agree - it's really helpful to me since I'm learning how it all works. Right now, I'm just using the monitoring to learn how my decisions affect my score - but I think I'm going to keep it for a while since I'm going to be paying off my student loans over the next two years and I want the peace the mind that my accounts are being reported properly as paid off and closed. I learned from my experience earlier this year that it can really hurt you to assume that mistakes aren't being made!