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I heard that with the new FICO model, they want you to spend ten percent or less of your credit limit to keep your scores from dropping.

I recently applied for a second credit card, one with four thousand dollars credit limit. My current credit card, the one with four hundred dollars is reported to the bureaus on the last business day of the month, while the one with the four thousand dollars is reported on the 23rd of the month.

I am likely to spend 99 % of my credit on the $400 card, but since the one with the $4,000 is with CareCredit, I only spent $430 in all, and don't plan to use it any time soon.

How will having one card reported as having a high balance, and another card having a low balance affect my score on a monthly basis if it is currently hovering around 694 points?

  • Are you currently paying off both cards in full each month? – TTT Apr 13 '18 at 16:32
  • The one with the $400 I pay in full each month. The one with $4,000 I cannot pay in full each month and must pay either the minimum, or something a little bit more than that. – HeavenlyHarmony Apr 13 '18 at 18:22
  • OK- how much do you owe on the CareCredit card? – TTT Apr 13 '18 at 18:25
  • On the CareCredit card, I have a balance of $430, as I already said in the question. – HeavenlyHarmony Apr 13 '18 at 18:26
  • Got it. I misunderstood. I thought you meant 430 total for both cards. – TTT Apr 13 '18 at 18:28
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Assuming you can't change your current spending habits, I would recommend to keep doing what you're doing now, which is maxing out the $400 limit card and paying it full in every month, and then minimizing the use of the higher limit card and trying your hardest to pay it down. I would say this even if maxing out one card could lower your score. Fortunately, evidence indicates that maxing your card has little if any effect, and instead what matters is the total utilization percentage. In your case your utilization percentage recently changed from 99% to 19% (830/4400). This should noticeably improve your credit score, if it hasn't already.

Now, even if maxing out one card did hurt your score, I still wouldn't recommend moving some of those purchases off of the low limit card and over to the second card, and the reason is because you aren't paying the second card off in full each month yet. Whenever you carry a balance you effectively lose the grace period and you'll pay interest on all of the purchases, whereas you don't pay any interest on the $400 card since it's being paid off in full. And since your credit score doesn't matter except for when you are trying to make a big purchase that you want to finance, I'd advise saving money in interest over worrying about your score. In the future if you want to finance something and it would help to have even a slightly higher credit score, you could consider making multiple payments to your credit card that month so that by the time it reports your total utilization is lower. This may bump your score a little for that billing cycle. Some people do this every month in order to see their score perpetually a little higher, but I personally wouldn't waste my energy on it until I'm going to use the score for something.

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There might be some impact to your credit score, but the biggest impact will be making your payments on time. If you pay it on time, then the other factors (utilization, age, etc.) will make less of an impact.

No one knows the exact formula that is used, but anecdotal evidence and the FICO website hint that overall utilization is what matters, not utilization of individual cards.

To be safe (from penalties, not from FICO score changes), though, I would not put so much on the low limit card. All it takes is one impulsive or incorrect charge to out you over the limit and trigger all kind of fees, making matters worse.

Pay your bills on time, use credit only for things that have to be paid (or don't use them at all) and your credit will be fine.

  • I have noticed the same thing re: individual CC vs total utilization. Moving a maxed out small limit card over to a high limit card didn't seem to matter. – TTT Apr 13 '18 at 16:30
  • As a long time contributor to the MyFICO forums, I disagree with the "overall utilization is what matters" statement. Its fairly well established by many users there that both overall and individual utilization affects scores, though overall Utilization does have a larger impact. @TTT - your experience shows that some credit profiles may not show this effect, but many MyFICO contributors have noted the effect. Its definitely a YMMV sort of thing. – Norm Apr 18 '18 at 15:00
  • @Norm - Just to be clear, if someone has two CCs each with a 1K limit, and they were to look at their score with $1K on one card and $0 on the other card, some people are finding their score increases when they change it to $500 on each card? If yes, do you know how much difference it makes? – TTT Apr 18 '18 at 19:40
  • On some profiles, yes, you might see a change upward - its usually not a huge change - usually just a handful of points, as overall UTI tends to have more influence. A lot tends to ride on the strength of the overall profile as well. A strong profile with a lot of depth and well aged accounts may weather a maxed out card better than a thin profile with young accounts. – Norm Apr 18 '18 at 21:38
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Any card with a high balance can affect your scores negatively. How much so is impossible to determine. Having a second card helps somewhat, as long as it has a low or no balance. The best "configuration" for scoring purposes is three revolving accounts, with only one reporting a balance of under 10%. That will generally peak your scores. FICO rewards you for successfully managing multiple accounts, however there is a small ding for having too many of those accounts show balances. Forum members at MyFICO have found that FICO generally penalizes you if 50% of your accounts show a balance. So if you have just two accounts, you get points for usage, but a slight deduction for being at 50% of accounts with balance. The way out of that "catch 22" is to have three revolving accounts. Also having one installment account in good standing helps out as well.

Edit: I added additional information to flesh out this answer a bit more.

  • Do you have a source for the third sentence (regarding using 3 revolving accounts)? – D Stanley Apr 13 '18 at 13:52
  • You can find details at myfico.com - they have a lot of info regarding how the scoring works, but basically it comes down to "showing usage" requires a small balance on one card, but there is also a small penalty for more than half of your accounts showing a balance. The way out of that catch 22 is three revolving accounts. – Norm Apr 13 '18 at 14:59

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