Is it better for your credit score to have one high balance of to split the balance between two credit cards

  • What is it that you're trying to accomplish that prompted this question? – quid Jul 11 '19 at 19:20
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    "Is one high usage CC and one low usage CC better than two medium usage CCs?" is a good question. – RonJohn Jul 11 '19 at 19:22
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    Why do you care about your score? Do you need a loan for something? – quid Jul 11 '19 at 19:42
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    David, a hidden problem with your question is that moving balances between cards incurs a fee (somewhere between 3% and 5%). All else (in this case. the APR on your cards) being equal, it might be cheaper to leave it all on the original card. – RonJohn Jul 11 '19 at 20:37
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    "Cheaper" is definitely a very different question than "better for my credit score." And if you're not applying for credit soon, "cheaper" is probably be more important thing to optimize for. – dwizum Jul 12 '19 at 12:45

sf02's answer correctly addresses the exact question you're asking. Utilization averaged across all accounts is important, but so is utilization on each individual accounts. So, if you must carry a balance from month to month, the "best" way to do it - purely from a credit score perspective - is to spread it evenly across all your credit cards.

However, there are some subtle yet important nuances to keep in mind. Most importantly, utilization is memoryless on credit scores. If you have utilization of X today, it doesn't matter what it was two months ago, or even yesterday. All that matters is utilization on the day on which your bank most recently reported your balances.

That has a few implications:

  • If you're following good financial habits and paying your card down every month, you may or may not see that translate into your score actually reflecting a zero utilization. Your bank(s) are reporting utilization on a set day each month, all that matters is the balance you're carrying on that day - not how long you've carried a balance, or what your overall actual "usage" of the card is. If you have a card with a $10k limit, you can charge $10k and let it sit forever - and then pay it all off the day before your account is reported, and suddenly you will have a zero utilization.
  • The impact to your score from utilization is easy to "game" or "fix" for a specific need. If you know you're applying for a loan in a given month, just make sure you pay attention to your utilization in the month or so prior to that. You can move balances or pay off account(s) accordingly, and your score will pop right up. In other words, you don't need to constantly monitor and tweak it unless you know you'll need a good credit score at some point in the very near future.
  • If you have to carry balances, you probably shouldn't plan how to spread them around based solely on impact to credit score due to utilization, since it's so easy to "fix" at the last minute if you need to. Instead, you should plan where to carry the balances based on the properties of each account. If you need to park a $10k balance (per your comments) across several available cards, you should probably pick based on interest rate, or where you can get the best rewards, or other factors. So, you may choose to just park that entire $10k balance on the card with the lowest interest rate (while you're presumably paying it down as fast as possible), even if that means your score is worse than it might be by spreading it across cards. Then, if you decide you need a loan or other credit soon, you can do a balance transfer or change your spending habits to spread utilization more evenly across all your cards.

Of course - the best policy is not to carry a balance at all, but that's not always feasible in all situations for all people.

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Yes it is better. Usually your credit card utilization will be judged in two parts:

  • overall credit utilization - meaning the utilization of the sum of all of your credit card balances.
  • individual credit utilization - the utilization for each credit card individually.

Having a high utilization in either category will hurt your credit score. By splitting the balance as you have proposed you will be helping with the second part that I listed.

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