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Utilization

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MeCasa
Valued Member

Utilization

After being around the forum for a couple of weeks I've managed to pick up a couple of hints at raising the credit score. Let me see if I'm right. I currently have 9 credit cards, most of them stay paid because I don't use them. But I do have two 0% cards that are maxed out. I thought this was a smart way to behave, using the bank's money as cheap money whereas the expensive cards are clean. But know I unnderstand that if I spread my debt around all the cards and keep everything below 25%, that the credit bureau's like this. I'll be paying more in interest but they'll like me better.

 

Is that correct?

Message 1 of 6
5 REPLIES 5
SouthJamaica
Mega Contributor

Re: Utilization


@MeCasa wrote:

After being around the forum for a couple of weeks I've managed to pick up a couple of hints at raising the credit score. Let me see if I'm right. I currently have 9 credit cards, most of them stay paid because I don't use them. But I do have two 0% cards that are maxed out. I thought this was a smart way to behave, using the bank's money as cheap money whereas the expensive cards are clean. But know I unnderstand that if I spread my debt around all the cards and keep everything below 25%, that the credit bureau's like this. I'll be paying more in interest but they'll like me better.

 

Is that correct?


1. FICO utilization is based on your reported balances. The reported balance is usually, but not always, the statement balance.

2. Having individual maxed out scores is bad for your scores, in all scoring models.

3. It's optimal to have most cards reporting zero balances.

4. There's no necessity to pay interest, and no the banks will not like you better if you do.


Total revolving limits 650200 (530700 reporting) FICO 8: EQ 708 TU 714 EX 715

Message 2 of 6
MeCasa
Valued Member

Re: Utilization

I do not have the funds to fully pay all the cards. My only choices are to leave it like it is or spread the debt over the 9 cards (all below 25% utilization) instead of having $20,000 at 0% interest and the rest of the cards empty.

Message 3 of 6
Thomas_Thumb
Senior Contributor

Re: Utilization

Since you are taking advantage of a 0% promo, take the credit hit and save some money.

 

However, maxed out cards are not good. That can lead to credit limit reductions. Consider transferring some of the balance to other cards to bring maxed out cards under 89% or better still 79%.

 

Fico does penalize for too many cards with balances. It is best not to have all cards reporting balances. If you choose to redistribute debt, keep a couple cards at 0 and stay under 49% for the cards you are transferring debt to.

Fico 9: .......EQ 850 TU 850 EX 850
Fico 8: .......EQ 850 TU 850 EX 850
Fico 4 .....:. EQ 809 TU 823 EX 830 EX Fico 98: 842
Fico 8 BC:. EQ 892 TU 900 EX 900
Fico 8 AU:. EQ 887 TU 897 EX 899
Fico 4 BC:. EQ 826 TU 858, EX Fico 98 BC: 870
Fico 4 AU:. EQ 831 TU 872, EX Fico 98 AU: 861
VS 3.0:...... EQ 835 TU 835 EX 835
CBIS: ........EQ LN Auto 940 EQ LN Home 870 TU Auto 902 TU Home 950
Message 4 of 6
SouthJamaica
Mega Contributor

Re: Utilization


@MeCasa wrote:

I do not have the funds to fully pay all the cards. My only choices are to leave it like it is or spread the debt over the 9 cards (all below 25% utilization) instead of having $20,000 at 0% interest and the rest of the cards empty.


It's impossible to say what the net scoring impact would be. You would be gaining points by removing the high utilization penalties, but losing points by having less accounts with zero balance.  Since it is clear that your present situation is the best position from a financial standpoint, I agree with @Thomas_Thumb that you might as well just stick with it, and pay the 2 over utilized 0% APR accounts down gradually, and avoid reporting any balances on the other 7 cards.


Total revolving limits 650200 (530700 reporting) FICO 8: EQ 708 TU 714 EX 715

Message 5 of 6
MeCasa
Valued Member

Re: Utilization

Thank you  :-)

Message 6 of 6
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