High Utilization


Recently I conduct a small test about credit scores focusing on the two following points:

  • It is often said that credit scores will be reduced if your many credit cards all have statement balance. Is it true? If the answer is yes, how much influence is it?
  • How much influence should High Utilization Ratio of one single card make?

The ways to conduct this test are relatively easy:

  • I really limit the number of my card with statement balance as possible as I can. For example, I only choose nine credit cards with statement balance from my twenty-one cards, and keep the total Utilization Ration under 5 percent;
  • I make a $860 of Balance Statement for my Discover card with the credit limit of 1k, and notice how the credit score should change.

The following chart demonstrates the changes of Fico scores in three major Credit Bureaus during the period:

Experian TransUnion Equifax
First credit score 724 746 761
What’s changed 2 new accounts, 9 credit cards have non-zero balances, 2 hard pulls on EX.
Second credit score 717 737 ……
What’s changed The utilization rate of Discover card is 86%.
Third credit score 690 720 736

It is very easy to see that more credit cards with balance statement will not cause too much influence. Even if you have been influenced by new accounts reported at the same time, you will only lose several credit scores in total. Certainly, only less than half of credit cards have balance statements in my test. If all the over 20 credit cards all reserve balance statements, credit scores may change more. In fact, few people can use all the over 20 credit cards in life. I think we, who open many credit cards, often use several fixed cards. Thus, that is not a matter worth being taken into consideration under most occasion. What we need to worry about should be the repayment, if we have more cards with liabilities.

Actually we should pay more attention to ratio of liability. As we can see from this chart above, credit limit and ratio of liability account for 30 percent among Fico scores, yet Ratio in the chart doesn’t clearly refer to Util Ratio of one single card or the total Util Ratio. It is certain that we should take these two elements into consideration and the actual ratio of liability should be higher. If you use one or two of your credit cards excessively, your credit scores will be influenced. Take me for example. The change of my credit score refers to 27 which is not very serious and my total scores still keep around 700. Only quality change of your score classifications does show that serious problems have occurred in your credit history.



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Credit Score Influence of High Utilization
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