What's a good utilization?

[vanillabean]

If you were told to keep your utilization less than 10%, would you accept it in good faith? How about 30%, 50% or 80%, not to mention 1%, 3-5%, 9, 49% or all the other flavors that regularly grace these forums? But according to John Ulzheimer of SmartCredit.com and formerly of FICO, Equifax and Credit.com, FICO has never spoken of any such percentage. There's nothing to indicate that any given percentage signals any particular threshold.

This is what John Ulzheimer has said in Credit Card Utilization, Defined and Demystified: "According to FICO, the consumers who have the highest scores in the country (760 and above) have an aggregate utilization of 7%. That’s about as clean of an answer you’re ever going to get to a FICO score question. Of course that doesn’t prevent people from giving answers that are all over the place. I’ve seen 30%, I’ve seen 50% and I’ve even seen 70%."

[jello77]

Many articles about credit scores say utilization should be kept below a certain percentage. It's a mystery where writers get these figures since, as far as I know, FICO has never specified any such percentage.

People on this board often talk about how scores can change when utilization changes. But they often fail to take into account that these additional factors also affect your score:

--  the dollar amounts owed on your accounts (independent of utilization)

--  the number of accounts showing a balance

(For a detailed list of factors included in your score, see this FICO page.)

When your utilization changes, the two factors listed above may also change. So if your score changes,  you can't necessarily attribute it entirely to utilization.

Regarding dollar amounts owed:

This previous post includes a FICO chart showing how score points earned can vary as your balance changes from $0 to $1000 or more. The chart shows maximum points when balance is between $1 and $99.

Regarding number of accounts showing a balance:

This previous post discusses how changing the number of accounts with a balance can affect your score. It shows maximum points when only one account shows a balance.

[pizzadude]

It's really a guessing game.   FICO has certainly not published any details of their proprietary scoring formulas, so all we have to go on is the anecdotal evidence of the what people report here at MyFICO.

[MarineVietVet]

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@pizzadude wrote:

It's really a guessing game.   FICO has certainly not published any details of their proprietary scoring formulas, so all we have to go on is the anecdotal evidence of the what people report here at MyFICO.

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Ditto.

Whatever seems to work for each person is all that matters. That's why I always say Everyone's situation is different and there is no one size fits all approach.

[MattH]

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@MarineVietVet wrote:

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@pizzadude wrote:

It's really a guessing game.   FICO has certainly not published any details of their proprietary scoring formulas, so all we have to go on is the anecdotal evidence of the what people report here at MyFICO.

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Ditto.

Whatever seems to work for each person is all that matters. That's why I always say Everyone's situation is different and there is no one size fits all approach.

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Especially since there are a number of different scorcards for thick files, thin files, major dings, etc., etc. So what applies to somebody with a long clean history might not apply to somebody else. In any case, if you can afford to pay in full then you can experment with your own exact situation, switching which card you use for purchases and when you pay each card to manipulate the reported balances then pull you scores here after trying a particular scenario. Remember most credit cards report your balance as of the billing date, so you can go to the website, check your balance, and pay it off just before billing date to make it report a zero balance. But check when your cards report, a few report at the end of the month and Amex sometimes reports what the balance was a month or two ago.

…

In my own case, my wife and botn have good jobs, carry very little cash, pay in full each month, and have high limit cards. So we use our cards a lot and our balances therefore fluctuate considerably depending what we've bought this month. Nothing else in our profiles changes much from montn to month: neither of us any negatives, and neither of us has applied for credit in about five years. So I think the variations in our FICO scores from about 780 to about 810 is likely due mostly to credit card balances.

[Anonymous]

I've played the util game a few times to see what util % would affect my scores.

I always keep myself @ 1% util.

I let 5% report once (on only one CC) no change to my scores, I let 9% report one time (on only one CC) and my scores dropped about 5 points, but the very next month when I got my util back to 1%, my scores went right back up to where they were.

I've never let 6%-8% report so I really do not know what changes to my scores would be at those utils, but I do know that my scores will stay the same with 1%-5% util reporting (on one CC) and my scores will drop a few points with 9% util reporting (on one CC).

I just thought I'd give some personal experience, but as stated in the other replies in this thread, everyone will experience different results with util, but for me it seems FICO likes me best when I'm at 1-5% util with only one CC reporting that balance.

One last thing, I let two CC's report small balances one month, I was still at 1% util, but my scores dropped about 9 points, so it is true that FICO really will reward you with your highest scores when only one CC is reporting 1-9% util, you just need to find your "sweet spot" with util. Like I have said, it seems my sweet spot is only one CC reporting @ 1-5 util.

Best of Luck!

[CreditGuy03]

Im trying to let a 7% report for the month. I will report with my changes. Currently I went from a 1% to a 85% util and that dropped my score 60 pts.

I made a payment to about 6-7% depending on added interest so we will see if my score goes back to the 1% level or lower. Looking for my sweet spot

[bobebob]

I think that something changed regarding the "only let a balnce report on one card" thing.

I just had an 11pt drop (after getting the new scoring "upgrade").  Only thing I saw change was a drop on 2 credit lines that were reporting a balance.

One went to 0, the other went from about $525 to $450.

Under the old scoring method, I would have gotten an increase in score.

Maybe the new model rewards use of multiple CC's (with small balances).  Just a thought.

[EW800]

Through my rebuild, I have gone from about 80% down to about 3% over the past two years.  I cannot say for sure where my sweet spot is, however I can say that I believe I saw the most impact when I went below 50%, below 30% and then again below 10%.  Right now I am at about 3%.  I have seen a few points added between 10% and 3%, however it could also be from a couple of baddies getting a bit older.  I will be going to about 1% to 2% when my current balances report, so I am hoping for a couple more points.  Bottom line is that getting below 10% seemed to be the best for me so far.  

[vanillabean]

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@bobebob wrote:

Maybe the new model rewards use of multiple CC's (with small balances).

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Could be. And a good mix of open tradelines too.