Experian drop of 17 points for Zero balance

[Anonymous]

Score dropped 17 points because of a zero balance reported.  I am having a hard time understanding the logic behind this.  I charge 2-3k everymonth on this card and pay it in full everymonth.  Why would I be penalied so much for this.  I am currently preparing to submit an application to refinance my house and am afraid that this will impact the interest rate I will receive.  

Do I have any recourse against this drop.  Can I dispute this.  It seems like these credit bureaus have us all hostage.  

My credit scrore went from 707 to 690.  

Thanks in advance for any help or suggestions in this matter.

[RobertEG]

Credit scores are explicitly exempted from the FCRA dispute process.

As for why a $0 balance is viewed as "negative," it is based on statistics.

FICO is a statistical analysis of data.

When a $0 balance is reported, FICO only sees that as absence of any debt.  It is the same as if no charges were made during the period, even though charges may have been made but the balance paid in full before reporting.  Absence of debt creates uncertainty in developing a statistical evaluation of probability of becoming delinquent on repayment of debt.

Perhaps FICO could be modified to score a 0% util the same as a very low util, such as 1-9%, if any charges were made over the billing period.

That apparently is not part of the current algorithm.

[Anonymous]

Thank you for your reply.

I understand what your saying about the algorithm and statistical data however, still doesn't seem right to drop someones score that much because they don't have any charges on a card for one week.  I could possibly understand it better if there were months with no balance but one statement balance!  

So you have to keep charging purchases on your credit card because if not, your score drops and you pay higher interest rates on loans and mortgages.  Wow...what a system!!!!  So if the banks don't get there commission on the credit card purchases, they will get there money in the form of higher interest rates.  That's what I mean about being held hostage by your credit score.

Thanks again for your reply.

[Enjay]

Let $2.00 report on one of your cards and pay everything off in full before the statementh hits (and don't pay it for a few days). FICO sees usage (which they don't see if the balance is paid before it's reported to the CRAs) and you will maximize your scores.

[takeshi74]

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@Anonymous wrote:

I am having a hard time understanding the logic behind this.  I charge 2-3k everymonth on this card and pay it in full everymonth.  Why would I be penalied so much for this.  I am currently preparing to submit an application to refinance my house and am afraid that this will impact the interest rate I will receive.

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Explained above and it has been posted many times here do not let all your credit cards report 0 balances as there is a hit for that.  If 17 points due to that one factor causes you to take a major hit on a new credit app then you probably have bigger issues with your credit profile that you need to work on.

It will certainly be hard to understand if you're not aware of how credit is assessed and scored.  This and other sites are vey useful resources with tons of infortmation.  If you have specific questions we can certainly help.  However, credit scoring isn't just about paying in full.  This link is just a starting point on the factors and typical weights for FICO scoring.

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

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@Anonymous wrote:

My credit scrore went from 707 to 690.   

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You don't have just one score.  There are many scoring models out there.  For most models you have a score with each of the 3 major CRA's.  Don't rely on just one score.

If a mortgage is your top concern then make sure you're looking at the scoring model that your mortgage lender will use.  Mortgage lenders do not use FICO 8 and they generally take the mid score for the model used.

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@Anonymous wrote:

Do I have any recourse against this drop.  Can I dispute this.  It seems like these credit bureaus have us all hostage.   

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It's not something you can dispute.  If your score is low it's because of your credit profile.  Identify the issues and work on addressing them.  No one's holding you hostage.  The way you manage your credit accounts determines what gets reported.  A scoring model then takes the data in the report and generates a score.

Dont' conflate the CRA's with FICO.  The CRA's maintan your reports.  FICO is a Fair Isaac Corporation product and not a product of the CRA's.   myFICO is a Fair Isaac site.

[Anonymous]

Good advice here. Just let a balance report each month on one or two accounts. It doesn't need to be much, but it will definitely help your score. Plus, remember that scores change at the drop of a monthly report so don't be discouraged. When I was rebuilding this happened to me and I had to read on this forum why. I corrected the problems of the time of month I paid and boom - huge score increases.

Good luck!

[Anonymous]

Like everyone else has said, I'm in the midst of rebuilding my credit too, let some cards report a balance and you should be alright.

[Anonymous]

Thanks for all the great replies.  Been working hard on rebuilding my credit and when I saw this credit drop I was so frustrated. 

I'm learning how the system works and will contunue to learn because understanding this only helps you out in the long run.

Thanks again everybody!!

[Anonymous]

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@Anonymous wrote:

Thanks for all the great replies.  Been working hard on rebuilding my credit and when I saw this credit drop I was so frustrated. 

I'm learning how the system works and will contunue to learn because understanding this only helps you out in the long run.

Thanks again everybody!!

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I can soooo relate to this, woke up today just to see 17 points dropped on my EX and 15 dropped from EQ because all my cards now reported zero... ugh and now I dont have any cards that will be reporting towards the end of the month ... which is sad usually have them spread out so I can make some changes pretty soon. I just dont want to get some sort of AR and I went from "Good" categories then dropped back down to "Fair" surely sucks to be in situation, I really need a bigger cushion so things like this doesn't make so much effect. Anyway, I have Penfed to report my Thrifty again at the end of the month so maybe take $200 iout of that so I can show some balance on my overall UTI. So frustrating sometimes to play this credit game

[Anonymous]

A credit score is really more akin to a debt score. FICO 8, along with many other FICO flavors, factor in current debt to some extent. Many borrowers with installent loans, such as a mortgage or car loan, are often surprised to see their credit scores drop when the loan balance is fully paid off. Take on more debt, within certain parameters (inquries, utilization, payment history, etc), and better one's credit scores will tend to be. Owe nothing, never borrow, and one's credit scores will be lower to non-existent.