Credit Scores and Reports

Credit mix and maxing out: Undoing damage from a heavily used card


If you have one credit card that’s close to maxed out every month, having a mix of other types of credit will help soften any credit score damage

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Question for the expert

Dear Let’s Talk Credit,

Hello, I have several questions and concerns that I hope you don’t mind answering. First, do retail credit cards differ from bank-issued cards as far as credit scores are concerned? Second, I have three credit cards: two bank cards and one retail card. Monthly, my credit utilization ratio for my first bank card is 9 percent and my second bank card is really low at 1 to 2 percent. However, I have been maxing out or close to maxing out my retail card to finance large purchases. I’ve been using the card because they have 18-month, no-interest financing. I understand how credit utilization can greatly affect my credit score, but with my two other cards in very low credit utilization and my other retail card with a very high utilization, how bad is it hurting my score? Third, how important is it to have a variety of credit accounts included in your history? As stated earlier, I have two revolving credit cards and one retail credit card. I’m asking because I’m thinking about applying for an unsecured loan to add variety to my credit history and to help further improve my score.

Last, I’ve been told that damaged scores from a highly utilized card, such as my retail card, isn’t permanent damage. I’ve been told that after I pay off the debt, the next month my credit is reported as paid off and it should bounce right back up. Is that true? — Vu

Answer for the expert

Dear Vu,
You certainly have done your homework! These are great questions. I am happy to answer them for you. Let’s take them in order.

1. Your bank-issued cards and your retail card are both revolving credit accounts. When scoring the contents of your credit report, the accounts will be viewed basically the same. You may earn slightly lower points in your FICO score if you don’t have a bank-issued card and only have a retail card.

2. The credit utilization ratio that is factored into your FICO score looks at both the ratio of your individual accounts and your total utilization ratio for all your accounts. If your one retail card is the only account that is over the ideal ratio (less than 30 percent), then your credit score is likely not suffering a great deal.

3. FICO considers the different types of credit accounts included in your credit report as 10 percent of your total credit score. So, the fact that you do not have any installment accounts such as a car loan or mortgage could be keeping you from reaching your maximum score. If the unsecured loan that you are considering is an installment loan, where you make the same payment amount each month for a specified period of time, it would help to boost your score. This is provided that you make payments on time and as agreed each month

4. Your information is correct that your credit score will rebound once your retail account is paid off and even if it is paid down to a more reasonable utilization ratio.

I think it is wonderful that you are concerned about your credit score and keeping your score at its maximum level. Keep your credit obligations to what you can afford each month, continue to make all payments on time and as agreed and your credit history will remain very good.

Let’s keep talking!

See related:Rules for improving your credit mix, FICO’s 5 factors for calculating credit scores


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