Hey,
First post here on this forum. This thread is useful, but because my search for "utilization ratio" came up blank, I am asking this question (which hopefully does not become a thread hijack).
My utilization ratio two months ago was about 90%, and this (according to my score watch analysis) was dragging my score way down (I used to be a 750, now I am a 660). Out of the 20k used, I just paid down 12k - that was three weeks ago but my score does not reflect these payments yet. I did notice that FICO seems to be updated real time you charge something, but there is a delay in recording when you pay down balances. Fine, so one of my cards was 11k, then I paid 8k on it three weeks ago. This weekend I made a small $60 charge, the thinking being that the CC company would transmit this "new charge" real time, but, by doing so, would also have to communicate that my total balance went from 11k to 3k (he he ha ha). My statement close date is the 22nd, so I am waiting to see if this tactic works. And the score watch really does seem to capture new charges real time, so this should be interesting.
My question is this. After this 12k paydown, one card is zero, two cards are less than 20% and one card is 71.42% (7k limit with 5k owing). I plan on paying down another 3k at month end (bringing my combined amount owing from 8k to 5k), so do I use this to bring all my cards to zero, but leave the 5k on the last card? Or do I pay the entire 3k against the card with a 5k balance, so that this card's utilization ratio drops from 71.42% to 28.57%? I think the real question here is this. What is FICO's definition of a "maxed out" card? Put another way, if I pay down all other cards to zero (or less than 10% utilization) but leave the one card at 71.42%, have I done myself a disservice because FICO sees a utilization ratio of 71.42% on one card, thus classifies me as being a distressed borrower?
Starting Score at June 2010: 679
Whew! 
OK, here's one start. Your new balances won't be on your credit reports, thus affecting your FICO scores, until your CCC's update again, which is usually on your statement date. So there's a bit of a lag. Your FICO scores don't exist unless and until someone pulls them, including you. They are a "snapshot" of what is showing on your reports at that very moment, whereas your reports are more of a movied, continually changing with each update.
Even new charges don't affect your scores right away, because they also have to be reported to the bureaus, again, usually on the statement date. HSBC/ Orchard bank cards and US Bank cards report your balances as of the last business day of each month. US Bank sends in the info right away; HSBC/ Orchard takes a week or two and sometimes just skips a month entirely, for the heck of it, it appears. If it feels like "new charges hit immediately", it probably means that the charges hit your reports right before they were due to update anyway.
FICO uses the info on your credit reports to crunch scores. That means that it's the lenders who are "controlling" the timing, via their scheduled updates.
As for how to distribute payments on the remaining balances, FICO evaluates both overall util and individual card util. We know that over 50% is bad, and as for exactly where the next hit is, we aren't sure. "Maxed out" is mainly used by us in discussing util, and we generally use it for over 85% - 90%. You'll still definitely be hit for the 71%, but possibly not as bad as what that card was before.
You have two tactics for the remaining payoffs, depending on whether you're shooting for optimum FICO scoring or optimum financial sense.
For scoring: the fewer cards with balances, the better. I'd say first pay the big balance card to 49% (not 50%, not 49.01%) or less. Then if you have enough remaining to completely pay off any small-balance cards, do that, maximizing the number that you can get to $0. Next time you pay, knock off any remaining balances on small-balance cards, and put everything else on the big-balance card, and keep whittling it down, month after month. Once everything is paid off, let one card report a balance each month, and then pay it off before the due date (frighteningly easy to do.) Again, this is for scoring purposes.
For financial sense: pick the card with the highest APR and throw everything at it, less the minimum payments to the others. Once it's paid off, go after the second-highest APR, this time adding the amount you paid on the first one to the second card's minimum, so now you're paying more on the target card. (Keep paying the minimums on the others, of course.) Wash, rinse, and repeat.
eta: Oh, and as far as your thread title goes, the "High Balance" field is meaningless unless you have a no pre-set limit card (NPSL), like a Mastercard World or Visa Signature card that doesn't report the CL but does report the high balance. Not all NPSL cards do this, but if you have one that does, it means that it uses the High Balance figure to calculate your util. Also, on the version of the TU FICO score that we're currently stuck with, AmEx charge cards (not their revolvers) have util calculated on High Balance, so if you have an AmEx Green, Gold, Zync, etc., make sure it reports $0, if you freak out at TU98 scoring. Which is less and less relevant these days.
edit to add yet again: And congrats on the great payoffs! You'll see the results soon.
Thanks for that Hauling. My TU is now 684 and EQ is 665 - this after my cards reported last month, the situation I laid out above has been reflected in my scores. TO recap, I have 23k in available credit, with $8,500 reporting
1. card reporting 3k (10k available credit)
2. card reporting 5k (7k available credit)
3. card reporting nine dollars (2.5k available credit)
4. card reporting $400 (4k available credit)
This is what I looked like after all my cards reported in late October:
| After cards reported on Oct 23rd | |||
| Balance | Available | Util ratio | |
| Card 1 | 3,000 | 10,030 | 29.91% |
| Card 2 | 5,050 | 7,000 | 72.14% |
| Card 3 | 9 | 2,250 | 0.40% |
| Card 4 | 440 | 4,000 | 11.00% |
| Total | 8,499 | 23,280 | 36.51% |
I have one late payment from May, and two lates that are just about 2 years old.
This is what I have done:
1. paid $2,100 on card 1 above (so that it's utilization ratio will be less than 10% when it next reports)
2. paid the entire 5k balance on card 2 above
3. The nine dollar balance card three paid down to zero, I have put this on ice
4. paid off entire $400 balance on card 4 above
All my cards report between November 23rd and 25th, save card 3, which reports on Nov 11th. This is the card that dropped my score by 15 points - I had paid it off in October, but they charged me nine dollars of interest, so I lost points becuase I had too many cards reporting balances. I am also an authorized user on my wife's card, which has a perfect payment history, but reported a balance of 3k (the credit limit on that card is $31,000). Funny how the scoring models did not include this card when calculating my utility ratio (I checked the math on my last report, and sure enough, that card was excluded from the utility ratio calculation). So the only thing my wife's card did for me was lower my score, in that the only thing the models counted was the fact that this card reported a balance, which I think is the reason why I am being dinged for 15 points becuase of the nine dollar balance on card #3
So here is where I stand, sometime after the agencies process the repored balances in Late November
| After cards report on Nov 23rd | |||
| Balance | Available | Util ratio | |
| Card 1 | 900 | 10,030 | 8.97% |
| Card 2 | - | 7,000 | 0.00% |
| Card 3 | - | 2,250 | 0.00% |
| Card 4 | - | 4,000 | 0.00% |
| Total | 900 | 23,280 | 3.87% |
I suspect that I will be hit for additional interest on cards 2 and 4, so they will show balances of less than $30 each. This is what happened to me after I paid off card 3 (where they charged me one final interest amount totaling the nine dollars). I will only have one card that reports a zero balance, but all cards will have utilization ratio's of less than 10%, and my total UL will be less than 4%
I have high hopes that my score's will go above 700 due to this paydown. I was maxed out on all cards in Septemeber - with UL ratio's on all cards were at least 95%. Let's see what TU and EQ think of me paying down about 22.5k worth of debt is two months...
@shortstack wrote:
... I have one late payment from May, and two lates that are just about 2 years old.
This is what I have done:
1. paid $2,100 on card 1 above (so that it's utilization ratio will be less than 10% when it next reports)
2. paid the entire 5k balance on card 2 above
3. The nine dollar balance card three paid down to zero, I have put this on ice
4. paid off entire $400 balance on card 4 above
All my cards report between November 23rd and 25th, save card 3, which reports on Nov 11th. This is the card that dropped my score by 15 points - I had paid it off in October, but they charged me nine dollars of interest, so I lost points becuase I had too many cards reporting balances. I am also an authorized user on my wife's card, which has a perfect payment history, but reported a balance of 3k (the credit limit on that card is $31,000). Funny how the scoring models did not include this card when calculating my utility ratio (I checked the math on my last report, and sure enough, that card was excluded from the utility ratio calculation). So the only thing my wife's card did for me was lower my score, in that the only thing the models counted was the fact that this card reported a balance, which I think is the reason why I am being dinged for 15 points becuase of the nine dollar balance on card #3
So here is where I stand, sometime after the agencies process the repored balances in Late November
| After cards report on Nov 23rd | |||
| Balance | Available | Util ratio | |
| Card 1 | 900 | 10,030 | 8.97% |
| Card 2 | - | 7,000 | 0.00% |
| Card 3 | - | 2,250 | 0.00% |
| Card 4 | - | 4,000 | 0.00% |
| Total | 900 | 23,280 | 3.87% |
I suspect that I will be hit for additional interest on cards 2 and 4, so they will show balances of less than $30 each. This is what happened to me after I paid off card 3 (where they charged me one final interest amount totaling the nine dollars). I will only have one card that reports a zero balance, but all cards will have utilization ratio's of less than 10%, and my total UL will be less than 4%
I have high hopes that my score's will go above 700 due to this paydown. I was maxed out on all cards in Septemeber - with UL ratio's on all cards were at least 95%. Let's see what TU and EQ think of me paying down about 22.5k worth of debt is two months...
Wow, that's some dramatic action there! And I think the combo of further slashing of your util, plus having fewer cards report, might well do the trick. It might take one more billing cycle, if you do wind up having some interest report, but that should do it. There ought to be another bump next May, when your late hits one year old. Of course, by then a million other things will probably have changed.
Interesting about the $31K limit card not being included! 
So maybe $30K is the magic figure for being excluded from util calcs after all, or at least, maybe $30K is the highest. I had always thought it was higher.
Hauling,
Thanks for the look (at my fact set). Do you think it likely that my score will go above 700 after my cards report in late November?
I actually am going to mail in the payment on card #4 (the one who's balance is $424). I will mail in $450, which should more than cover the interest. Let them show a "credit" balance on my account (the opposite of owing them money). It will be interesting to see what the scoring models handle this. I bet you they will count that card as carrying a "balance", even though that balance is the CC company will be owing me money! The models have not been programmed to account for a "negative" balance - some developer likely coded that test as "if balance is zero, do nothing, if balance is not zero, than classify that card as "Carrying a balance"
And yes, her available credit is $31,000 - I allways thought this would be included in my utilization ratio, but the developers (the programmers) working for TU and EQ were given strict instructions on the logic to be applied with AU cards.
I can just picture the memo to all the developers at TU and EQ:
To: All Developers and Programmers
From: The President, COO, and Board of Directors, Trans Union Corporation
Re: Credit assessment algorithm guidance
Date: January 12, 2009
There has been some confusion amoung our development staff on how to factor AU cards into the existing credit assessment algorithm as part of our new "protecting the consumer" intiative. As you are all well aware, we are in process of "revamping" the credit assessment algorthms to reflect today's harsh financial climate. This all said, AU cards will only contribute to a credit score if that card produces detrimental results on the overall credit profile. Put another way, if everything about the AU card is stronger (higher credit limit, lower utilization, longer life, better payment history) than the assesse's credit cards, than this AU card must not be allowed to factor into the credit assessment algorithms. Failure to comply with this guidance will result in immediate termination.
Thanks for your tireless dedication and contributions to our new "Protecting the Consumer" intiative. We are counting on you to complete coding a full two months ahead of the Experian and Equifax development groups.
cc: Jamie Dimon, Lloyd Blankfein, Vikram Pandit, Anthony Mozillo,
Actually, they haven't tweaked the FICO scoring formulas used here. The FICO 08 formula (still just beginning to gain ground among lenders) still scores AU cards, but they try to verify that there's an actual relationship between the parties --common last names, addresses, something that indicates that the AU line wasn't sold ("piggybacking.")
High-CL CC's and LOC's are excluded from util scoring for everyone. For instance, I have a $50K CL HELOC that (thank goodness) is ignored for revolving util scoring. Others with ultra-high CL CC's report the same. As I mentioned, I always thought that the cut-off figure was more in the $35-$40K range, but maybe $30K is the highest that is included. This is pertinent for those who keep increasing their CL's, only to find that suddenly the card doesn't help them any more in their util, because the CL is now so high. The flip side is that if you get a HELOC with a lower CL, say around $25K, Experian includes it in your revolving util, and that new roof and hardwood flooring suddenly makes it look like you have a CC with 95% util.
I never try to predict score increases, because I'm always, always wrong. But I think that you'll have another healthy increase with your final pay-down, and as I said, if more than one card reports a balance, you might still get another few points when that's killed off.
Having a balance in your favor on a CC will cause it to be treated as if it has a $0 balance. This has been demonstrated time and again by many members, including me --since I get a cashback credit every month on my PenFed Visa, it usually reports a $10-$20 credit each month. On my credit reports, it shows as $0.
@Anonymous wrote:
@shortstack wrote:Let them show a "credit" balance on my account (the opposite of owing them money). It will be interesting to see what the scoring models handle this. I
Hi shortstack,
Today's good news:
your credit balance will read as $0 as far as your credit report and FICO score are concerned.
yippee!
Whoops, I posted without seeing this!