Personal Finance

Credit Utilization Impact on Credit Score

  • Last Updated:
  • May 23rd, 2018 1:41 pm
[OP]
Sr. Member
Aug 31, 2001
524 posts
56 upvotes

Credit Utilization Impact on Credit Score

Hello,

I am wondering what is the impact of maxing out a Unsecured Personal Line of Credit of say e.g. 100,000 and carrying over - but paying the interest due?

Can and will the banks who offer the PLOC raise your interests, reduce your credit limit / make you pay outstanding?

My understanding is that a healthy credit utilization is around 30% (Outstanding Debt vs Credit Limit across all Credit (including Credit Cards etc.))

Thanks,
6 replies
Deal Addict
User avatar
Mar 9, 2012
3506 posts
2138 upvotes
Kitchener
Sedul wrote: Hello,

I am wondering what is the impact of maxing out a Unsecured Personal Line of Credit of say e.g. 100,000 and carrying over - but paying the interest due?

Can and will the banks who offer the PLOC raise your interests, reduce your credit limit / make you pay outstanding?

My understanding is that a healthy credit utilization is around 30% (Outstanding Debt vs Credit Limit across all Credit (including Credit Cards etc.))

Thanks,
1) Technically they can ask for all the money back whenever they decide.
2) Technically they can raise your interest, lower your limit, whenever they decide.

Technically, the above doesn't usually happen.

A good utilization is under 30%. And under 10% is better. Maxing out your PLOC could warn the creditor that you're having financial issues. It hurts your credit (so getting new credit is harder).
Why can't we all just get along?
Deal Fanatic
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Aug 24, 2016
8059 posts
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The Prairies
jeff1970 wrote: 1) Technically they can ask for all the money back whenever they decide.
2) Technically they can raise your interest, lower your limit, whenever they decide.

Technically, the above doesn't usually happen.

A good utilization is under 30%. And under 10% is better. Maxing out your PLOC could warn the creditor that you're having financial issues. It hurts your credit (so getting new credit is harder).
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[OP]
Sr. Member
Aug 31, 2001
524 posts
56 upvotes
From an overall outstanding credit evaluation, it's best to have <=30% utilization.

However, if I had 3 LOC from 3 different Banks/Creditors of say 100k each, hypothetically speaking, is it best to take at most 30k from each one (as oppose to 100k from one LOC) so to not raise flags with that one bank.

If that is the case, it would be ideal to have multiple LOC from different creditors to spread it out.
Deal Addict
User avatar
Mar 9, 2012
3506 posts
2138 upvotes
Kitchener
Sedul wrote: From an overall outstanding credit evaluation, it's best to have <=30% utilization.

However, if I had 3 LOC from 3 different Banks/Creditors of say 100k each, hypothetically speaking, is it best to take at most 30k from each one (as oppose to 100k from one LOC) so to not raise flags with that one bank.

If that is the case, it would be ideal to have multiple LOC from different creditors to spread it out.
My understanding, and it might be different in Canada, it's better to utilize with 1 source rather than many. Bank can and will do soft checks and basically see the same thing we see when we do a soft check. Apparently doing most of your usage at one source is better then spreading it. So in other words, it's more valuable to owe at one and none at the other 2 or 3.
Why can't we all just get along?
Newbie
Sep 10, 2014
54 posts
14 upvotes
Toronto, ON
How about Equifax - How do they calculate credit utilization. Do they take sum(of all balances)/ sum(of credit available) or look at accounts individually to assess?
Member
Mar 16, 2011
413 posts
208 upvotes
A bank will increase your chances for raising your interest rate, Ill bet since a high utilization will seem riskier to them.

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