Will I loose points for a credit card reporting over 50%?

[Anonymous]

I know from the forms to achieve the best score from fico, is to have all credit cards report zero while one reports a small balance. I want to achieve this next month, if everything goes as planed and see what fico score I get. The only kicker is have a $2000 Barclay card I want to pay down to $1500 that will be 75%. After some love from nfcu. I will still be at less than 1% utilization. Will I achieve the best score or will I leave points on the table because the one card reports 75%. I can pay the card down to 50% if it will make any difference. It is interest free is the reason I am carrying the balance.

Thanks

[SouthJamaica]

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@Anonymous wrote:
I know from the forms to achieve the best score from fico, is to have all credit cards report zero while one reports a small balance. I want to achieve this next month, if everything goes as planed and see what fico score I get. The only kicker is have a $2000 Barclay card I want to pay down to $1500 that will be 75%. After some love from nfcu. I will still be at less than 1% utilization. Will I achieve the best score or will I leave points on the table because the one card reports 75%. I can pay the card down to 50% if it will make any difference. It is interest free is the reason I am carrying the balance.

Thanks

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Yes you are leaving points on the table. You of course should pay it down to 49%, but you'll still be leaving some points on the table by not paying it down even lower.

FICO doesn't give you points for cleverly getting interest free borrowing.

[Anonymous]

Your FICO scores will be lower with one card reporting 75% utilization (or any amount over 10%, for that matter) than they would be if that card reported 9% or less.

However, one thing to keep in mind is that the effects do not accumulate over time. So if you maintain that higher utilization on that card for awhile and then, at some point in the future, pay it down below 9%, you will get at that point get the same benefit to your score as if it had been below 9% all along.

So unless you are planning to apply for something soon, you're not really hurting yourself by carrying that balance, as long as you put yourself in a position to pay it off when you do need to increase your scores for some application.

[Anonymous]

Great point, Plip.  A really big chunk of the posts of the Forum take the form "I know that I need to keep my utilization really low to build up my score...."

But in fact, as you point out, the scoring advantage you get for the low U, while substantial, is one that you get immediately.  So there's no particular advantage in keeping your cards at an ultralow U every single month.  Just in the 1-2 months before an important credit pull.

The one slight caveat I might make is that it sounded like you were thinking that FICO imposes some penalty when any individual card goes over 10%.  A lot of people seem to believe that but as far as I can tell there's no evidence for it.  To the contrary, lots of people have reported no score penalty for individual cards that are quite high, e.g. 45%.  A contributor I respect on here did seem to experience a definite score boost when (without changing his total U) he had a few cards cross from > 51% to < 49%.  But as long as each individual card is <49% (certainly < 29%) I am personally doubtful that there's a per-card U penalty.

The penalty for total utilization, however, begins much lower.  Probably at 9% as you say.

And of course you are right that individual U penalties can be steep when the U is high, e.g. our OP's level of 75%.