Utilization thresholds?

[C_DUBYA]

Hey all

are there certain percentages that utilization uses in scoring?  Like 10%,40%, etc?

in my case I have high utilization of 77% and within a month will drop to about 63% and then 40% a month after.  (Work bonus/raise etc). I am trying to see if I will see some boosts or not. 

thanks!

[SouthJamaica]

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@C_DUBYA wrote:

Hey all

are there certain percentages that utilization uses in scoring?  Like 10%,40%, etc?

in my case I have high utilization of 77% and within a month will drop to about 63% and then 40% a month after.  (Work bonus/raise etc). I am trying to see if I will see some boosts or not. 

thanks!

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In aggregate revolving utilization there aren't any major thresholds. The lower, the better.

In individual revolving account utilization there are pretty clear thresholds at below 30% and below 50%.

[C_DUBYA]

Ok. Right now I am paying off 6 credit cards.  Most are 80% util now. They will all go to 0%.  Would that affect scores?

[Mdowning30]

Dont let all accounts report zero, you want to atleast let one report 1-9%, even better to be under 7%.

[Singledadof3]

The truth about credit card utilization 

I like to refer to this thread.

[C_DUBYA]

That is a bit confusing as everyone appears to push AZEO mindset.  If that is the case why is AZEO promoted so much for score improvement?

[SouthJamaica]

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@C_DUBYA wrote:

Ok. Right now I am paying off 6 credit cards.  Most are 80% util now. They will all go to 0%.  Would that affect scores?

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Yes that would do wonders for your scores. Will be like night and day.

Just be sure to let one card report a small balance each month before you pay it off.

[SouthJamaica]

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@C_DUBYA wrote:

That is a bit confusing as everyone appears to push AZEO mindset.  If that is the case why is AZEO promoted so much for score improvement?

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AZEO was developed as a way of insuring that you are not being penalized for too many accounts with balance in any scoring model. In most of the modern scoring models, as long as more than half of your revolvers are reporting zero balances, it doesn't matter much if you have one account with a balance or six accounts with a balance. In most cases having a minority of accounts reporting balances is just as good as having only one account reporting a balance.

So in my view AZEO is widely misunderstood in these forums. It's really just an insurance policy if you want to be sure to maximize your scores in the older scoring models, as for example when you're about to apply for a mortgage.

[mgood]

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@SouthJamaica wrote:

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@C_DUBYA wrote:

That is a bit confusing as everyone appears to push AZEO mindset.  If that is the case why is AZEO promoted so much for score improvement?

---

AZEO was developed as a way of insuring that you are not being penalized for too many accounts with balance in any scoring model. In most of the modern scoring models, as long as more than half of your revolvers are reporting zero balances, it doesn't matter much if you have one account with a balance or six accounts with a balance. In most cases having a minority of accounts reporting balances is just as good as having only one account reporting a balance.

So in my view AZEO is widely misunderstood in these forums. It's really just an insurance policy if you want to be sure to maximize your scores in the older scoring models, as for example when you're about to apply for a mortgage.

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That's something I've wondered. Is it different for the various scoring algorithms?

Lot's of people swear by AZEO, but I read that 1/3 is ok, or 1/4. More recently I commonly hear "less than 50%."

So you're saying that for the newer models, less than half avoids the penalties. But do older models, like the mortgage scores, benefit from some smaller number showing a balance? If you have a dozen or so accounts, does it really matter anywhere if it's AZE2 instead of AZE1?

Sorry about the baby penguins @Remedios 

[Remedios]

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@mgood wrote:

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@SouthJamaica wrote:

---

@C_DUBYA wrote:

That is a bit confusing as everyone appears to push AZEO mindset.  If that is the case why is AZEO promoted so much for score improvement?

---

AZEO was developed as a way of insuring that you are not being penalized for too many accounts with balance in any scoring model. In most of the modern scoring models, as long as more than half of your revolvers are reporting zero balances, it doesn't matter much if you have one account with a balance or six accounts with a balance. In most cases having a minority of accounts reporting balances is just as good as having only one account reporting a balance.

So in my view AZEO is widely misunderstood in these forums. It's really just an insurance policy if you want to be sure to maximize your scores in the older scoring models, as for example when you're about to apply for a mortgage.

---

That's something I've wondered. Is it different for the various scoring algorithms?

Lot's of people swear by AZEO, but I read that 1/3 is ok, or 1/4. More recently I commonly hear "less than 50%."

So you're saying that for the newer models, less than half avoids the penalties. But do older models, like the mortgage scores, benefit from some smaller number showing a balance? If you have a dozen or so accounts, does it really matter anywhere if it's AZE2 instead of AZE1?

Sorry about the baby penguins @Remedios 

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Yes, it's different for different scoring models 

Older ones that are commonly used for mortgage lending love it and it makes sense that they do. At the time those were implemented, population had 1-2 cards on average, so having two cards reporting hit 100% of revolving accounts with balances metric. 

Over time and with different data sets, FI arrived at Fico 8 and conclusion was that it wasn't necessarily how many accounts reported a balance, it's about how high those balances are. 

This continued with Fico 9, too.

For me, AZEO is 4 cards with balances on 8/9. Once I go over, different CRAs treat those accounts in a different way from scoring loss perspective. EQ seems to have biggest loss regardless of how low balances are, they are ticked off. EX doesn't really care that much till about half report, TU is somewhere between those two.  

It's all hype unless one is buying a house but "it works for me" will always be conversation ending statement because once you start balance neurosis takes over.

I have seen people filling CFPB complaints because lender wouldn't report mid-cycle after they forgot to pay pack-of-gum-to-keep-card-alive before statement closed.