If maxing a credit card is so bad, why does a score not move when paid to 0 balance?

[jlfce1]

Very, very interesting....

I've been waiting for my last statment to close on a card that I had maxed.  I recently paid all of my accounts to zero with the exception of 2.  One still remains: $487/2200 (this is a 0% 6 month purchase on my Firestone).

Anyway, I had my Amazon maxed out $639/$700.  On the 13th of last month, I paid all my CC's after learning the importance of low utilization.  So, I've been patiently awaiting results getting boosts little by little as the statements closed.  I received the alert this morning from myfico....report 0 balance (and my CL increased from 700 to 2500) - not even an inch of a move in score...stayed exactly the same.

So that brings me to my question.  If maxing a card takes such a hit on your score - then why no movement on this last one posting?

[Countingpennies]

0% reporting on all accounts is not the best for scoring. A small balance on 1 card is best. There are different opinions on the ideal percentage for utilization, but it's usually under 9%. For me personally, my best scores are with 4% overall utilization, and 1 card with a balance.

You got small bumps as you paid balances down, and it flat-lined at 0%. Sometimes, it can even drop a little at 0%. The scoring likes to see card use.

This is based on my reading and experience, YMMV.

[guiness56]

It also depends on what your utilization was before you paid it off.  If it wasn't very high, just dropping down 5% probably wouldn't give that much of a boost.

I agree you should not let them all report a 0 balance,  FICO doesn't like that.

[jlfce1]

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@guiness56 wrote:

It also depends on what your utilization was before you paid it off.  If it wasn't very high, just dropping down 5% probably wouldn't give that much of a boost.

I agree you should not let them all report a 0 balance,  FICO doesn't like that.

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I'm still reporting a balance of 487 on a card with a CL of 2200 -22%

Overall, my utilization right now is: 6%

As of May 13th my utilization was bad---very, VERY bad.  About all the cards I had were maxed out.  That's why I thought when the last reported as paid with a zero balance it would have triggered at least some type of increase - even 1 point.

I have a 30 day late well over 4 years and a collection that is an error (reported Nov 2011) and should be removed soon (I don't know how long that process takes but the utility company did advise it was their error and are currently reversing this collection).  That's all the bads. 
My EQ is standing at 683

according to the similutor, just paying all my balances should have shown a max score of 717.  I know it's not 100 but I thought I'd at least hit 700 - 690 at minimum.

I've been doing a lot of research and it appears the scoring for utilization is in addition to if your card is maxed out.  Per Bankrate, they stated that myfico advised that simply maxing out 1 card can cause a 10-30 pt decrease, so I find it interesting that it's appears to be difficutl to reverse that type of damage being my score didn't move.

[longclimbback]

From my experiences I can tell you 2 things. You'll probably see a 10 point upswing if you pay that 1 card that's left down to 1-4% like the others said. The second thing is that with a collection on your record it is unlikely that you'll get much past 700 until its gone. I had a really thick file with no late payments listed, but I had a derog statement listed for settling a HSBC account for less than full balance. I couldn't get any higher than low 700's. When the derog statement fell off instant 800+. My baddie was a full 7 years old, yours is only 2. My point: its impossible to get much past 700 with a major baddie. Get rid of it and your score will skyrocket.

[Revelate]

There's been some good analysis done elsewhere on this topic: my own personal experience as mixed-file with scores in the 660-680 range, a single month for having a tradeline be maxxed is identically a loss of 14 points; however, that's individual to me and my current credit report.

That said, I never float my balances as I'm playing silly reindeer games while CLI chasing; in some instances, people with a longer-term trend of higher utilization can be rebucketed, and that may mean several months may go past before the algorithm changes.  This may be what you ran into, or it may be something else entirely, it's just hard to know for any one individual and their credit report information, especially sanitized as it is on this forum.

[jlfce1]

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@longclimbback wrote:
From my experiences I can tell you 2 things. You'll probably see a 10 point upswing if you pay that 1 card that's left down to 1-4% like the others said. The second thing is that with a collection on your record it is unlikely that you'll get much past 700 until its gone. I had a really thick file with no late payments listed, but I had a derog statement listed for settling a HSBC account for less than full balance. I couldn't get any higher than low 700's. When the derog statement fell off instant 800+. My baddie was a full 7 years old, yours is only 2. My point: its impossible to get much past 700 with a major baddie. Get rid of it and your score will skyrocket.

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I guess time will tell.  Clearly I'm watching very carefully to ensure the company does what they say and notifies the collection company that due to their error it's not valid.  It's been two weeks, so I'm giving them a month.  I have documentation so I will move forward if it's not dropped within the next couple weeks.  I don't have experience with this, so I'm not sure if I should wait longer, but I felt that 30 days was good. 

And to update, my score actually did increase 7 more points; it just wasn't an alert that was sent.  I bought my report again and that's when I received the 7 point increase.  My Ex is 717 (no collection), EQ 688.  I'm hoping in the next 3 months I will have 1-3% utilization and that this $231 collection has been removed.  This time next year, I'm hoping for 760+ so I can qualify for the best mortgage rate when I go to apply for my 1st home.

Edited to update score increase: It was by 5 points, not 7.

[enharu]

An important thing to note as well.

Your scores are not the only thing lenders evaluate during an application. A maxed out card alone can pretty much be grounds for denial with most prime banks.

I'm not trying to tell you to ignore your score entirely, but what's inside your CR is sometimes more important than just the score that comes out of it.

[Crossdivided]

If you are speaking of Score Watch alerts, keep in mind it's not instant. I believe the "by the book answer" is 7-10 days (although I personally usually see alerts 3 days ish behind the change).

[shols44]

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@jlfce1 wrote:

Very, very interesting....

I've been waiting for my last statment to close on a card that I had maxed.  I recently paid all of my accounts to zero with the exception of 2.  One still remains: $487/2200 (this is a 0% 6 month purchase on my Firestone).

Anyway, I had my Amazon maxed out $639/$700.  On the 13th of last month, I paid all my CC's after learning the importance of low utilization.  So, I've been patiently awaiting results getting boosts little by little as the statements closed.  I received the alert this morning from myfico....report 0 balance (and my CL increased from 700 to 2500) - not even an inch of a move in score...stayed exactly the same.

So that brings me to my question.  If maxing a card takes such a hit on your score - then why no movement on this last one posting?

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How are your SW alerts setup? Any chance you have your alert treshold set to high? perhaps your score has moved but not enough to trigger an alert based on your setup.