Credit score

[water1111]

I am working really hard at lowering my debt and increasing my credit score.

I have the missed payments and 1 outstanding debt and I also have a few accounts in good standing. So I know It will be awhile before those accounts with late payments or the 1 outstanding account will be off my creit report since it is all recent (except for the 1 outstanding debt which is from 2003.

The truth of the matter is my mom was fighting cancer and I couldn't think straight so I would literally pile up envelopes of bills and not even open them up because it seemed so mundane at the time when you are dealing with life and death issues.....Now I regret this of course but to make a long story short I just didn't pay for 60-90 days then I would pay so the accounts were never closed -----just marked as late.

Right now all I can do is pay down my debt so my debt ratio is low. Right now, I am using about 60% utilization of my revolving credit cards. Here is my question.....what is a good percentage to try to get to?

I have already paid off 3 revolving charge cards......

[sweeps]

30% or less.

[poundwise]

Sweeps, don't take this as argumentative, because it certainly isn't meant to be, but where do you get that figure from?

I have seen such stated repeatedly but never have seen why it is the magic number. I Googled just now and found several sources that said, "Anything under 50% is good" while others said "30% and under" and "as low as you can go." To that last statement, another source added, "From zero to 10% is best" while a conflicting source stated, "Ideally you want between 30% and 50% utilization."

So, while I don't doubt that under 50% is good advice and 30% or less logically would seem to be even better, how exactly do we know? Or do we?

(FYI: Some of the sources I clicked and quoted from were: MSN Money Central, Fool.com, The Boston Globe, The Washington Post, Bankrate, etc.)

[poundwise]

Sweeps, don't take this as argumentative, because it certainly isn't meant to be, but where do you get that figure from?

I have seen such stated repeatedly but never have seen why it is the magic number. I Googled just now and found several sources that said, "Anything under 50% is good" while others said "30% and under" and "as low as you can go." To that last statement, another source added, "From zero to 10% is best" while a conflicting source stated, "Ideally you want between 30% and 50% utilization."

So, while I don't doubt that under 50% is good advice and 30% or less logically would seem to be even better, how exactly do we know? Or do we?

(FYI: Some of the sources I clicked and quoted from were: MSN Money Central, Fool.com, The Boston Globe, The Washington Post, Bankrate, etc.)

[poundwise]

Sweeps, don't take this as argumentative, because it certainly isn't meant to be, but where do you get that figure from?

I have seen such stated repeatedly but never have seen why it is the magic number. I Googled just now and found several sources that said, "Anything under 50% is good" while others said "30% and under" and "as low as you can go." To that last statement, another source added, "From zero to 10% is best" while a conflicting source stated, "...the ideal range is between 25% and 50%."

So, while I don't doubt that under 50% is good advice and 30% or less logically would seem to be even better, how exactly do we know? Or do we?

(FYI: Some of the sources I clicked and quoted from were: MSN Money Central, Fool.com, The Boston Globe, The Washington Post, Bankrate, CreditCard.com. etc.)

[sweeps]

Current issue of Money magazine.

I don't know if it makes a lot of difference whether it's 25%, 30%, 35%, whatever, but I think somewhere around 1/3 utilization is the general rule of thumb people have come up with through experimentation.

[poundwise]

Originally Posted by Sweepsplayer

Current issue of Money magazine.

I don't know if it makes a lot of difference whether it's 25%, 30%, 35%, whatever, but I think somewhere around 1/3 utilization is the general rule of thumb people have come up with through experimentation.

True. That would seem to be the case.

Originally Posted by water1111

Right now all I can do is pay down my debt so my debt ratio is low. Right now, I am using about 60% utilization of my revolving credit cards. Here is my question.....what is a good percentage to try to get to?

I have already paid off 3 revolving charge cards......

first off let me say I'm sorry for what you've had to go through. I would love to drag you along to some of these forums / communities so full of themselves from elitist opinions on money behavior and try to help them understand that life happens.


secondly, you've already been responded to by two of the most informed opinions here but quite frankly, if my answer is of any value...my goal was (and destination became) 0%.


certainly not always possible for everyone but I had no desire to be in "less" mess than I was in, I wanted to be done with it.


but as Sweeps' says, around a 1/3 seems to be the most commonly quoted utilization ratio. keep in mind though, nothing is ever that simple. I believe 5000 on one 15000 card would look better than 5000 on three cards totaling 15000 (when all of the 5000 is on one maxed card).


but I personally don't know for sure.

[Diolla]

I am not trying to be flippant but isn't the best 0%? Then you don't have to pay all those finance charges. Running a balance doesn't help you score so why not just pay them off as soon as you can and then don't charge more than you can pay off each month.

[sweeps]

Originally Posted by Diolla

I am not trying to be flippant but isn't the best 0%? Then you don't have to pay all those finance charges. Running a balance doesn't help you score so why not just pay them off as soon as you can and then don't charge more than you can pay off each month.

Absolutely. But I think the "ideal utilization" thing is a big deal for some because they want to find a balance between taking maximum advantage of 0% balance transfers and minimizing the hit to their credit score.

[Ima saver]

I pay off my card every month, but sometimes my husband will charge 50% or more just in one month. They don't look at the balance as being zero every month, they look at it as 50% or more. That is a problem. I use this card because of the cash back feature, but I don't have a very high limit, only $7000.

[vsjhoc]

Originally Posted by rexdart

but as Sweeps' says, around a 1/3 seems to be the most commonly quoted utilization ratio. keep in mind though, nothing is ever that simple. I believe 5000 on one 15000 card would look better than 5000 on three cards totaling 15000 (when all of the 5000 is on one maxed card).


but I personally don't know for sure.

Congrats on paying off the 3 accounts!

This is correct. The 1/3 utilization factor is considered for each card, so maxing out any one card will probably lower the score.

[disneysteve]

Originally Posted by Diolla

I am not trying to be flippant but isn't the best 0%? Then you don't have to pay all those finance charges. Running a balance doesn't help you score so why not just pay them off as soon as you can and then don't charge more than you can pay off each month.

Even if you pay off your card in full each month, the utilization ratio still matters. My credit card never has a $0 balance, because I use it regularly. So even though I always pay my bill in full, my credit report always shows a balance and my credit score would reflect that.

[poundwise]

Exactly.

[vsjhoc]

Plus as I understand it, each creditor reports your balance (and other info) to the credit bureaus only once per month. It looks like that day must typically be mid-cycle. If it were immediately after the due date, a lot more reports would show a zero balance for those people who paid in full and didn't charge anything after the statement closing date.

[Squantum]

Yes, if you get a copy of your credit report, it lists your credit card balance (by card) every month. So, whatever day that happens to be, that's what gets reported to the credit bureau, even if you pay it off the next day.

[Ima saver]

Right, there is always a balance showing on my credit score, but it does get paid off monthly, however, that is not shown. I think something should be noted that the balance is always paid off each month and no interest is charged.

[disneysteve]

Originally Posted by Ima saver

I think something should be noted that the balance is always paid off each month and no interest is charged.

As much as it matters to you and me, it really doesn't matter to creditors. All they want to see is that you manage your credit responsibly, pay your bills on time and aren't over extended. Whether or not you carry a balance doesn't really impact your credit worthiness, as long as you can comfortably manage the debt you are carrying.