Credit Utilization
 

I recently made some large transactions on a few credit cards. My overall credit utilization probably won't go above 25%, however this is still a historical high. I have a combined $60k credit limit across 4 different providers, plus 2 cards without stated limits.

Should I pay them off now, before I get the statement, or just sit tight? Or maybe an option in the middle to get the monthly credit utilization down between 10-15%?

Or is this really inconsequential? I was hoping to do another churn in January/February.

Keep utilization >10%.

Also, 30% of your credit score is utilization but obviously that is only what is reports to the agencies. Just don't let it report with that high of a number. Pay some off before statement date.

Thanks for the quick reply - I followed your advice.

The ideal number is 2% utilization, according to the FICO people.

Overall utilization is a factor and each card's utilization is a factor.

It's not a linear scale, so for most people, under 10% on both of those is top tier.

Another factor is how many cards report a balance. Ideal is 1. 2-3 is usually top tier.

If any of your cards is HSBC or USBank, they tend to report balance on the 1st of the month, not statement balance.

Mdtr brought up a good point I forgot to mention, and something I do myself. I only have one card report a balance but I pay it off partially before the statement date so it always reports 1%.

I saw nothing mentioned at myfico.com about an ideal utilization rate. However they do say this: http://www.myfico.com/crediteducatio...ment-help.aspx Keep it below 50%.

Another "expert" here http://www.creditcards.com/credit-ca...-owed-1270.php says keep it below 30%.

Does anyone have something from FICO that they can link to? I see I lot of different figures flying around. :)

Good links and thoughts - it actually brought another question to mind: What do credit issuers look at? Are they focused on the score itself, or do they use their own metrics in conjunction with the score? So maybe credit issuers used to want a low utilization score, but maybe some want a higher one, either to earn interest or get customers with higher purchase volumes? Just thinking out loud.

I can't link being on my phone but the common consensus at FICO is >10% but ideal for 800+ scores is 1%.

I have always followed the 1% rule myself and that combined with other factors in my credit report has always me my scores to be 800+ across all three bureaus.

I am confused - I think you guys mean < 10% (less than 10%) ?

Now I'm upset at myself. Just spent an hour trying to find the source I had originally quoted that said 2%. All I can find is me saying I read it and quoted it in the past. So I'm going to stop saying it, since I can't support it.

However, here is a source from FICO that says the right number is above 0% and below 10%: http://articles.marketwatch.com/2011...-rod-griffin/2

Also, if you run FICO's own score analysis yourself on myfico.com, it reports that "FICO High Achievers" - scores 760+ - average a 7% utilization.

I'm in a similar situation but won't be able to pay in advance prior to statement posting to my account. I read somewhere that it counts on both the individual card's utilization and your overall credit. Is that true or is it only based on your overall credit?

I plan to make a $10K purchase soon and if it's based on my overall credit (Chase, Citi, AMEX) I should be around 22% utilization vs 67% if it's based on one card. Will this lower my score temporary for this month only and if I pay early next month, the score will go back up again? I assume it "fluctuates" each month depending on your how much you spend and how early you pay before it gets posted.

I will be able to pay it off before the due date but was just worried how it will impact me since it will most likely be reported to the credit agencies and I will be applying for more cards come mid January.

Thanks.

Utilization is calculated overall and by individual card. It is generally a good idea to not have over 50% on one card and under 10% overall. Your score fluctuates all of the time, you may lose a couple of points or things may remain the same. Overall utilization is considered the more important factor by FICO scoring models. Ideally I would wait to apply until your balance is back down on your credit reports. Just watch for when the statement cuts on that specific card and time your next applications accordingly.

Thanks longhorn11. I guess I'll wait till February in that case. I usually have a low overall utilization (less than 10%).

Another thing to keep in mind when you're trying to figure out your utilization is that some Visa Signature cards don't report your credit limit. So those cards aren't calculated into your available credit limit nor your debt to credit ratio.

interesting