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I have three secured cards with me, one of which gives me rewards for gas and another for online purchases.

The third one is a Mastercard - I use that only where my VISA cards do not get accepted.

This way, I have 30% utilization on one card, 10% utilization on the other and 0% - 1% on the MasterCard.

I was wondering:

  • Is my credit utilization (30 + 10 + 1)/3 = ~14% or is it 30%?
  • Will this skewed credit utilization affect my scores in any way (frowned upon by credit bureaus or my provider as high risk)?
  • Is it recommended to have an uniform utilization accross your credit cards or is the situation I am in kind of "expected" from users?
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4 Answers

up vote 4 down vote accepted

It's neither. You need to take your total balance and divide by total available credit. Your equation assumes same credit lines, is that the case?

If you keep a balance, push it toward the lower interest card. Pay it off as fast as you can, credit card debt is a killer.

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Yes, all the cards have same credit lines and account age (+ or - two months). I also will not keep a balance as I have confirmed via a lot of reading around that it never helps your score. –  f1StudentInUS Oct 4 '11 at 3:30
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Utilization is the first equation (Total balance/total credit available) you had. The people looking at your credit history really don't care too much how the credit card debt is spread. They care mostly about utilization, total credit available and credit history (late payments, etc).

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Your overall credit utilization is 14% (assuming each card has the same credit limit). However, according to a few sources, utilization is important on a per-card as well as overall basis. Therefore, you may see a slight improvement in your credit score by lowering the utilization of your card with 30% down to the neighborhood of 20%.

I have not seen anything that suggests having a skewed utilization among different credit cards affects your credit score differently than a uniform utilization, assuming all credit cards are within an acceptable utilization range.


Sources:

Anthony Sprauve from myfico.com:

The FICO scoring system looks at "the total available credit and the total balance used," says Sprauve. "But it also does look at individual lines of credit. So it factors in both."1

Credit Karma:

Experts recommend keeping your credit card utilization below 30 percent on each card and collectively. This shows lenders and credit scorers that you know how to spend responsibly and will help your credit score. However, creditors also care about the total dollar amount of your available credit, so if you have a low credit limit, don't worry if your credit card utilization rate is slightly higher than recommended.2

1 from foxbusiness.com
2 from Credit Karma

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Nobody cares about utilization on a per-card basis, unless you are at or above your credit line on a particular card.

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