Scared to pay my CC's due to score drops every time!!!

[kuku4koco]

I've recently been getting some really nice score boosts due to acquiring new credit and TL's, as well as USE of credit.  But, it seems like every month that I pay my credit card bills (after statement cuts), my scores drop.  How long does this happen for?  I am in the rebuilding stage.... and I've had a few of my cards for more than 6 months.

I know people always say.... "well it could be because of something else changing in your report".. NO... it's every time I pay my bills.   Other's say "pay all to zero but 1 and let that report between 1-9%"... That's not really ideal for everyone to do every month, and I've read on the forum where people have done this and still experienced a drop in scores.

I understand FICO doesn't have a memory with Utilization.... but what difference does that make when my scores drop 40 pts because I'm paying my bills???!!  Then I have to wait for some other 'unknown(s)' to increase them again... (USE).

I also understand about the 'credit mix' (ex: car loan, mortgage, personal loan, etc)  Yes, naturally once one of those are paid off you lose that mix.... which I do not have anyway... I have credit cards/revolvers, that's it (for now).

I've gotten better credit boosts by USING my credit... so they really like to see people in 'debt' is the general feeling I get.... 

So what do I do?  Just make the min. payment like the score simulator says (for 2 years?!?) that's not realistic either... especially with 'Toy' amounts... what gives??

Also, paying before statement dates is not always feasible either, based on earnings/income pay dates.  LIke I stated above... my increases seem to generate due to credit USE, so the FICO likes to see that I'm using my credit; If I were to pay before statements cut, it wouldn't look like I was using anything right? But I have to pay the bills, that's a part of being a Responsible credit holder... Why do some folks get penalized for that?

****I've read other posts about this... I still don't get it (obviously).  Thanks for any responses in advance!!

[Anonymous]

I don't know for sure why you are having the experience you describe.  (Just for clarity, you believe that you are experiencing a score drop caused solely by you paying your cards in full after the statement cuts,)

One of the reasons that seems impossible to many of us is that FICO can't see whether you have paid your bill in full AFTER the statement cuts.  FICO can only see the data that the credit bureaus have, and most cards report the balance that was on the statement.  So, as far as FICO is concerned, your balance is whatever that statement reported.  The fact that you paid that balance down to $0 a week later is something FICO doesn't see -- unless of course you don't use the card again for a couple months, in which case the card will report $0 the next month to the bureaus.

The only score drops related to paying off credit cards (and these are well documented ) is when, by a stroke of bad luck, the timing of the payoffs results in all of the user's cards reporting as $0 for a brief period.  Chase is one issuer who will often send in an additional report to the bureaus if you pay your card down to $0.

I would be worried for you if you believed that paying your cards in full can cause a score drop (with the exception of the "all zero" case I just mentioned).  My worry would be that you'd conclude, as it seems you may have, that it is not in the interest of your credit score to pay in full, and that maybe the best thing is for you to pay somewhere between the minimum payment and the full amount owed, carrying the remainder.  That would be a shame, from my perspective, because you'd be adopting a long term policy of paying interest to the credit card companies when it was not helping you at all.

My advice to you is to use your cards naturally.  Use them for purchases you really want or need, with an eye to remembering that keeping personal spending low is a well know route to prosperity.  Then always pay the balances in full, after the statements post.  Don't try to keep all cards at $0 except one -- that's a tiring strategy and you are right that it gives you absolutely no long term benefit.  If you use your cards naturally, always PIF, and always pay on time, you will in the long run experience great growth in your credit scores.

PS.  I note that you have thirteen credit cards.  Just as a quick observation, all you need is three cards to power a very high FICO score.  Thirteen doesn't hurt you in itself, but necessarily it has caused your average account age (AAoA) to go down as you have added all those cards, and that does lower your score.  If your sole concern is raising your score, you would benefit a lot from not adding any more cards and just letting your existing accounts age.  You would also benefit a lot from adding one cheap installment loan -- that can be done at extremely little cost you.  Feel free to ask more about that and people will be glad to explain more.

[kuku4koco]

CreditGuyInDixie.... Thank you so much... Your response triggered the observation that I have been missing and further reminded me that I do NOT want to pay interest!!  ***Rebuilding is a Marathon, not a race! Slow and steady is the key and as time goes on, I will continue to see the desired results, by using my credit 'naturally' and paying in full.

(the anxiety of score growth is real!! hahaha)

Thank you!!!  

[kuku4koco]

And YES... admittedly.. I got sucked into the 'Newbie' App Spree tunnel along with the SCT!!! Typical Rookie mistake 

[Anonymous]

Newbie App Spree Tunnel is a marvelous phrase.  It sounds like some piece of psychedelia from a movie like Yellow Submarine. 

Best of luck!

[takeshi74]

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@kuku4koco wrote:

But, it seems like every month that I pay my credit card bills (after statement cuts), my scores drop.

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That's incorrectly assumed causality.  We can't tell you why your scores drop without the details regarding your credit and how it has changed over time.  To determine the cause of any scoring change you need to carefully review reports from before and after the change to see what data changes lead to the scoring change.

You need to look at the standard factors and see how the data changes on your reports are relevant to these factors.

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

For one thing, look at your reported balances and calculate your revolving utilization.  This has an impact on Amounts Owed, the second biggest factor.

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@kuku4koco wrote:

How long does this happen for?

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There's no set timeframe.  A score is generated based on the data in a report at the time the score is generated. If your report improved since the score was previously generated the score improves.  If the opposite happens then the score drops.  If there are no significant changs then the score won't significantly change.  Time does play a part in some of the factors but you can't rely on time by itself.

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@kuku4koco wrote:

I know people always say.... "well it could be because of something else changing in your report".. NO... it's every time I pay my bills.

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It's not that it could be due to something changing in your report.  It is due to data changing on your report.

Any score is generated based on data in a report.  The numbers don't just arbitrarily change.

Paying your credit cards does not impact your score aside from building Payment History.  Your revolving accounts do not report based on payment due date.  Either they report on statement date or another fixed point in the month.  Changes to your reported revolving utilization will certainly have an impact on your scores.  If you're paying after the statement cuts then you probably have balances reporting.  How are those balances impacting your revolving utilization?

I guess it is possible for payments to drop your score but they would have to be late.  You'd know if you were paying more than 30 days late and you'd also see such lates indicated on your reports.

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@kuku4koco wrote:

Other's say "pay all to zero but 1 and let that report between 1-9%"... That's not really ideal for everyone to do every month, and I've read on the forum where people have done this and still experienced a drop in scores.

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Of course, revolving utilization isn't the only scoring factor.  See the link I provided above.  It is a significant factor but even with low or optimized utilization one could have other factors with a greater total impact.  Scores aren't just a matter of one single factor.  They're a total sum of all factors as assessed by the given scoring model.

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@kuku4koco wrote:

So what do I do?  Just make the min. payment like the score simulator says (for 2 years?!?)

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Do not just pay the minimum.  Pay in full.

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@kuku4koco wrote:

I've gotten better credit boosts by USING my credit... so they really like to see people in 'debt' is the general feeling I get.... 

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@kuku4koco wrote:

LIke I stated above... my increases seem to generate due to credit USE, so the FICO likes to see that I'm using my credit; If I were to pay before statements cut, it wouldn't look like I was using anything right?

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This is also incorrectly assumed causality.  The factors are in the link provided above.  Using credit doesn't guarantee anything in and of itself.  Usage and how it impacts those factors is what matters.  One does not need to carry balances for scoring purposes.

If you're not getting anywhere reviewing your own reports we can help if you're willing to disclose some information about what's in your reports.  You're overlooking something and that's why you're having difficullty understanding the scoring impact of activity.

[kuku4koco]

I do pay in full and on time... Thank you for your input!