% of CC line used that lowers score

Discussion in 'Credit Talk' started by DaveH, Oct 25, 2001.

  1. DaveH

    DaveH Well-Known Member

    Hi All,

    What a great and well needed-board! I just discovered you all, and look forward to much broswing. :)

    Here's one immedite question:

    What are the guidelines for when using a credit card line starts to meaningfully reduce your credit scores with the big 3? I've seen a 1/3 of the line figure and a 1/2 of the line figure, but with no supporting evidence to back these claims up.

    I would very much appreciate and links or info any of you have.

    BTW, I'm not talking about carrying a balance on the credit lines month to month and paying interest--I'm talking about very short term, but substantial charges.

    A little background on me: Equifax 720, TU 786, experian ?. Household income around $105K annually, SEVERAL credit card lines (at least 90K in all), with perhaps 3 with close to half their lines in use (lines range from 7-$15K) without going over that.

    Thanks in advance, Dave
  2. roni

    roni Well-Known Member

    What excellent questions!!! (And welcome!)

    Correct answer... NO one knows! Most commonly believed in answer... 1/3 of your credit line. At least this is when people stop getting %s as one of the reason codes on the FICO scores.

    I don't have any written proof, but I thought you might like to know, that when I talked with a Fair Isaac manager, he did let me know that even if you pay off your balances every month, the ratio still applies because you are utilizing the credit. It does not really matter about the history of your credit ratios, just what is currently reporting.

    Hope this helps... And again, welcome!
  3. DaveH

    DaveH Well-Known Member

    Thanks bkev for that friendly and helpful answer :)

    "Correct answer... NO one knows! Most commonly believed in answer... 1/3 of your credit line. At least this is when people stop getting %s as one of the reason codes on the FICO scores."

    Makes sense--I reckon that short of an forthright employee of the CUs, that's tbe best evidence we have. :)

    "It does not really matter about the history of your credit ratios, just what is currently reporting."

    I believe that, but it seems just asinine. Clearly, if a person has a history of running up large balances _during the month_ and then _paying them all off_, that shows its more than a cash management tool for them than debt. Indeed, it should be a positive, as it shows that a person uses credit responsibilty even when agressively. But then again, they didn't ask me. :)

    I'll offer my own experience to the repository of collective wisdom here. In late 1999, had about 8 yeas of perfect credit (no idea what my score was then, but Amex Blue gave me a $20K credit line despite $70K in other cards, so it must have been decent.) Then, I took advantage of a couple 6 month, no interest cards and used them to remodel a newly purchased house. That was during the .com boom of course, and among other neat deals, Citibank was letting you fund a high interest bank account with up to $15K from CCs and charging them _as purchases_, not cash advances! Long and short: I had about $18,000 of that $20K line in use, along with a similarly high balance on my other teaser cards.

    Well, it never occoured to me that my credit would take a hit, given my history of problem-free agreesive CC use. But then I got denied for a basic brockerage account, and was told on the QT by the brokerage officer that my score was a 570! That's what promted me to sig into this stuff in the first place.

    [begin rant] I resent that i have to substantially curtail my CC use and cash management strategies just to keep the crude models used by the scoring agencies from blackballing me. I further resent that my credit was brought down to near-junk status with no warning or heads-up (which would have allowed me to act quicker.) Finally, I resent the fact that no one with professional ties to these groups can seemingly give me a straight answer about how SPECIFICALLY to tailor my behavior to make the crude statistical models they use happy. But I'm sure I'm likely preacing to the choir on this, and perhaps together we can effect some change over time. [end rant.]

    Anyone else have further into on this subject?
  4. OtherTerri

    OtherTerri Well-Known Member

    Hi, Dave!

    I was always told that the proper use of a credit card was to use it and pay it each month!

    How did you raise your score from 570? Was it only by reducing debt? I'm still new at this, but it sounds like that is your only issue. How long did it take to raise your score?

    As far as the % question I have read 20, 25 and 30% here. I think it has also been suggested that it might depend upon the situation.

    Hope I am not just imagining this! I'm pretty tired...

    Anyone ??
  5. DaveH

    DaveH Well-Known Member

    Hi Terri,

    Yes, when the 0% interest period expired and I knew how much the remodling would come to, I lined some resources up and paid the entire $38K balance of at once. I did nothing else different.

    I have no idea how long it took for my credit score to return to normal. It's been maybe 15 months since I paid the debt off completely, and as of 2 months ago the scores I've checked are well into the 700s.

    Thanks for the reply, Dave
  6. lbrown59

    lbrown59 Well-Known Member

    They want it this way so they can use FICO as an excuse to fleece you!
  7. tom65432

    tom65432 Well-Known Member

    I now have a perfect credit report except that my credit card limits are $63,000 total and I have about $62,500 balance. All payments have been on time, never late. I have about 38 positive credit lines, including open and closed.

    Based on that, my score at Experian is a steady 667. My TU score is 728 but has recently been as low as 698. My Worthknowing score is 50.

    My conclusion is that the % of credit use does play a substantial part in the score. I am monitoring my score daily on credit expert so I will let you know eventually how much paying off the debt will raise the score. So far, a slight decrease in the total amount of debt has not raised the score at all. Getting a paid collection removed earned me one whole point.
  8. DaveH

    DaveH Well-Known Member

    Thanks for the additional datapoint Tom (do I have your name right?)

    Do you carry balances, or simply use the lines to manage cash?

    Also, have you been happy with credit expert? I'd definiately consider signing myself and my spouse up for that.
  9. tom65432

    tom65432 Well-Known Member

    Those are my balances. I used the money to feed the family . I had a very bad year with two serious surgeries. I am now back on my feet.

    Credit Expert is decent but not great. I am now in the trial period but will keep it. I use it everyday to check my balances, but most importantly, I am trying to figure out when each card reports. When I figure that out, I plan on borrowing some money to pay off some cards, let them report a zero balance, then do a balance transfer to those cards, let the second group report a zero balance, then try to get a few low interest rate cards. I'm getting screwed on interest now. I can start paying back the cards now, but a lower interest would sure help.

    The CE simulator is useless. They estimated I would get a 120 point jump if I got the small paid collection removed. It jumped one point when that item was deleted.

    The other advantage of CE is that I can cheaply monitor one credit report to see what pops up. That paid collection was not mine but it sure caused me problems.
  10. DaveH

    DaveH Well-Known Member

    Thanks for your answer Tom. I wish CE let you monitor all 3 agencies--that'd definitely be worth the annual fee for me. YGM, BTW.
  11. DaveH

    DaveH Well-Known Member

    Tom, if you happen to see this, would you send me a line indicating if you got my message? no need to reply other than that. Thanks. :)

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