Is credit utilization calculated per card or combined total?

For just about anything you want to get off your chest about credit cards.
7 posts
Starwind
Green Member
Green Member
 
Posts: 7
Joined: Tue Apr 03, 2012 10:53 pm
Location: Indiana

Is credit utilization calculated per card or combined total?

Postby Starwind » Tue Apr 03, 2012 11:07 pm

So, I've had a secured Capital One card ($200 Limit) for about 6 months or so now. I've noticed drops on my credit recently due to using the card for more than $100 then it being being picked up with over 50% usage, never carried a balance though.

Now, I was just approved for a Discover Open Road Card ($500) Now, my question is is my utilization based off of just the $500 or is it the combined $700? Also, how often can I make payments to keep this down? example: Would there be any issues paying my full balance at the end of each week vs once at the end of the month in order to keep this ratio good?

I know I really should just wait for an increase on the limit, but my debit card doesn't update in a timely manner. This causes me to over spend occasionally. Thus the times when I had over 50% on my Capital One Card. Trying to stream line my budgeting process.


Crashem
Centurion Member
Centurion Member
 
Posts: 538
Joined: Fri Mar 09, 2012 9:29 am
Location: San Francisco, CA

Postby Crashem » Wed Apr 04, 2012 12:20 pm

It's more complicated than one calculation. Generally speaking, utilization is calculated on total utilization (ie all limits added together and all balances added together) on revolving credit. But there are other dings for too many balances on cards, individual cards being high utilization etc. But overall utilization makes up th bulk of the category.

in terms on how you should handle it, i think you have an unspoken but misconceived notion on FICO scores. Previous FICO scores have nothing to do with current FICO scores. Basically, FICO scores are calculated at the moment it is called for by looking at your credit report at that moment in time. Obviously a lot of credit report information doesn't really change over time. You aren't going to make your AAoA suddenly higher from yesterday to today. BUT, utilization is one thing that can change very suddenly.

So what does this mean for you? Basically, it means you shouldn't worry about utilization month to month. Don't worry about making your utilization appear low or high. The only time you need to worry about it is when you are going to have a credit event, IE. you are going to apply for credit. So if you are working on your credit, you should NEVER apply for credit without planning for it. Once you score is high enough, you don't need to worry about it, but in the mean time, every application for credit should be planned. Before you apply for credit, you want to make your utilization appear in the ideal state which is 0 balance across all cards but 1 which will carry a small balance (less than 10% of your card's limit).

So what should you do in the mean time? credit card companies report to the bureaus once a month. Every credit card is different. Some report at beginning of month, some when they generate you statement, some when they payment is due, etc. You just need to call your credit card companies and find out when they report for future reference. So if they report when they generate your statement on the X day of the month, you would need to pay the balance a few days in advance (recommend setting up online bill pay in advance) and not use the cards during those few days. If you are curious how much a difference it makes for your score, then try it one month and see. Otherwise don't worry about it unless you are planning to apply for credit.
Amex Centurion, Amex Platinum, Amex BCP 8k->24k (5/23/12), Amex TE 15k, Cap One 1.5% 15k->20k (8/7/13), CSP 25k, Chase Palladium 100k, Citibank AA 35k (AU), Firestone 1.8k->2.2k->2.4k (8/20/12), JFCU Jloc 30k, PenFed Plat Rewards 30k, SF Fire 30k, US Bank Cash+ 25k

Starwind
Green Member
Green Member
 
Posts: 7
Joined: Tue Apr 03, 2012 10:53 pm
Location: Indiana

Postby Starwind » Wed Apr 04, 2012 8:36 pm

That clears up a lot for me. My score had fluctuated quite a bit on capital one's free service. 724 dropping to 648 on the lowest month with utilization being the biggest factor as I could tell. Credit karma says I'm at 701 currently and I just got approved for chase freedom card as well although I wasn't provided the limit for it as of yet. I wasn't sure if have high utilization would have a negative effect if consistent over the course of several months even if paid off.

Thanks for the info.

Crashem
Centurion Member
Centurion Member
 
Posts: 538
Joined: Fri Mar 09, 2012 9:29 am
Location: San Francisco, CA

Postby Crashem » Thu Apr 05, 2012 10:17 am

Starwind,

Yeah. I got of people think credit scores are like a report card for school where your work done previously builds up over time. In a real sense, this is completely false, but in a practical sense, it kind of does. The reason is that most of the information on a credit report is a reflection of information built up over time such as have you been paying on time. But when it comes to information that can change suddenly such as utilization, you see that FICO scores are a snapshot of your credit at a certain time.

As FYI, I would avoid applying for too many more cards. It is time for you to groom so you can get higher credit lines, better cards, etc. Wait a bit (6 months?) and set up your credit perfectly. Then find some generous issuers for your next round that will be better with credit lines and no annual fees (check out credit union reviews. lots of them are generous but do your research). Also, you can apply for CLIs if you think you can get them (ideally with soft inquiries). Your goals should be to get higher CLIs. You will find once someone gives you higher CLIs, you will start getting higher CLI's from your current cards or new ones.
Amex Centurion, Amex Platinum, Amex BCP 8k->24k (5/23/12), Amex TE 15k, Cap One 1.5% 15k->20k (8/7/13), CSP 25k, Chase Palladium 100k, Citibank AA 35k (AU), Firestone 1.8k->2.2k->2.4k (8/20/12), JFCU Jloc 30k, PenFed Plat Rewards 30k, SF Fire 30k, US Bank Cash+ 25k

JCarter
Centurion Member
Centurion Member
 
Posts: 323
Joined: Thu Mar 15, 2012 10:40 pm
Location: Virginia

Postby JCarter » Thu Apr 05, 2012 11:33 am

Incorrect again,

Utilization per FICO's own explanation is PER LINE of credit open, excluding certain lines (Mortgages, student loans) and then they factor a score based upon how many lines of credit are open and if it is a revolving line (HELOC for example) or a card line and the utilization upon each category with a credit card category receiving lower scores for higher utilization.

FICO explained this directly to congress and I am sure CSPAN has the tapes if you want to review them.

Starwind
Green Member
Green Member
 
Posts: 7
Joined: Tue Apr 03, 2012 10:53 pm
Location: Indiana

Postby Starwind » Thu Apr 05, 2012 4:35 pm

I do not planning an adding anymore cards anytime soon. It was time to upgrade from my secured card and the combination of The Freedom card and Open Road will do me just fine for a long while until I'm ready to add an AMEX that won't be until at least fall though maybe later. Just want to make sure I'm doing everything I can to keep my score up. If all goes well with work I may be looking for a mortgage around that time instead of a new AMEX card. :D

hematino
Centurion Member
Centurion Member
 
Posts: 339
Joined: Fri May 11, 2012 4:08 pm
Location: Atlantic City, NJ

Credit Utilization Question

Postby hematino » Fri May 18, 2012 10:49 am

I have kind of an oddball question. When credit utilization ratio is calculated, does anybody know if credit bureaus count the ratio for each individual credit card versus that card's credit limit (and average them out) or just your total reported balance versus your total credit limit from all cards?

For example let's say (for some nice easy numbers) you have three CCs, with limits of $500, $2000, and $5000, and balances of $400, $100, and $500. Calculated the first way your utilization percent on average would be a staggering 33% compared to the second method, which would calculate to only 10%. It can make a pretty big difference.

Does anyone know which method (or maybe some other way) that they calculate this percentage? Any responses or opinions are much appreciated! I am curious to know.
Now she's eyeless.
The snakes she held once
Eat up her hands.



Return to “General Credit Card Talk”

Who is online

Users browsing this forum: No registered users and 2 guests