Balance decreases on credit cards-Credit score drop

[buttercup1]

Can someone explain to me(evidently I'm stupid) how a decrease on the balance of a cc would cause a decrease on a credit score. I thought paying a cc balance down helped your score. My score dropped.

[llecs]

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@buttercup1 wrote:

Can someone explain to me(evidently I'm stupid) how a decrease on the balance of a cc would cause a decrease on a credit score. I thought paying a cc balance down helped your score. My score dropped.

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There can be some scenarios in which paying off a balance can lead to a FICO score decrease:

1) The CC is reported or coded as closed. Paying it off would remove it from utilization. If there are any balances on any other CC, then that payoff would result in higher util and potentially lower FICO.

2) This was the only remaining open account reporting a balance. Oddly enough, all $0 balances can result in a ding.Why? Maybe it shows a lack of usage...maybe all $0 balances is a negative in lenders' eyes and thus FICO. Who knows.

3) The CC is a CO. Paying it off would still lead to a CO update and that can drop your FICO. Also relates to #1 since CO'd CCs most usually still factor into util.

4) The CC suffered a CLD. If updated to $0, then it means a new statement cut. That's usually the time a CLD is generated. Lower CL will lead to a higher util if there are balances on your other CCs.

In paying down a balance to a non-$0 balance, the following can lead to a FICO decrease:

1) Like in #3 above, paying on a CO'd CC can lead to an added late and that can decrease your FICO.

2) Like in #4, if a CLD was issued with that statement then that can decrease your FICO.

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Absent the above, and assuming it is a FICO you are looking at and both before and after FICO scores are from the same source, then you've got me. If this came from a SW alert, then know that other changes to your report could have led to a net loss (e.g. balance increases on other TLs, dropped accounts, added accounts, etc.). If there are other changes then that can cause a FICO change too. Definitely review your reports.

If you are comparing a FICO with a FAKO, then that can be a cause of error. If looking at FAKO to a FAKO, then changes in the tide or moon phases could have impacted your score too.

[buttercup1]

I don't know either. This item was the only thing that popped up on the alert. That's why it seems so odd about a decrease in the balance and a drop in score. Nothing has changed in CC. My limit, etc is the same. The only other thing that I can think of is that I had a card from Cap1 that got bought out by Citi. Maybe Citi is reporting since Cap1 had closed it. But an alert on this didn't show up if it was reported.

[llecs]

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@buttercup1 wrote:

I don't know either. This item was the only thing that popped up on the alert. That's why it seems so odd about a decrease in the balance and a drop in score. Nothing has changed in CC. My limit, etc is the same. The only other thing that I can think of is that I had a card from Cap1 that got bought out by Citi. Maybe Citi is reporting since Cap1 had closed it. But an alert on this didn't show up if it was reported.

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Did the alert come from SW? Remember, that alert is a NET score change. It doesn't necessarily mean that X caused Y point drop. For example I once got a SW alert for +20 because I added an inquiry. The inquiry alert was the only alert received. It's easy to assume from the alert that inquiries give 20 points, but we know that isn't true. After I pulled my CRs, I realized that a baddie dropped. I may have lost 0-1-2-3-4-5 points on that inquiry, but gained 20-21-22-23-24-25 points on the removal of the baddie resulting in a net change of 20. Make sense? There could be other changes to your report resulting in that change (just throwing out possibilities that wouldn't always result in an alert) like a dropped TL, updated baddie, an added late, small balance increases on other TLs, CLD on some CC, a TL change, etc.