Experian only - reducing card balances dropped score 22 points!

[Anonymous]

I have three open credit cards...   last week I paid one down to zero (previous balance $53.00) and this week I paid down another from $7 to zero balance. 

The first pay down dropped my score 8 pts and the latest zero balance dropped my score 14 points further.

Neither Transunion nor Equifax were affected. 

Does anyone know what could be going on here. The amounts involved are tiny. It's really suprising going to zero balance from such a small balance caused a drop of 22 pts so quickly.

I'm really focused on rebuilding my credit so I'd like to know how this works. I know the general rule is to keep some small balances to keep your overall utililization somewhere above zero but below 10% ideally... but didn't expect that I'd have to micro-manage every single account every month.

[Anonymous]

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@Anonymous wrote:

I have three open credit cards...   last week I paid one down to zero (previous balance $53.00) and this week I paid down another from $7 to zero balance. 

The first pay down dropped my score 8 pts and the latest zero balance dropped my score 14 points further.

Neither Transunion nor Equifax were affected. 

Does anyone know what could be going on here. The amounts involved are tiny. It's really suprising going to zero balance from such a small balance caused a drop of 22 pts so quickly.

I'm really focused on rebuilding my credit so I'd like to know how this works. I know the general rule is to keep some small balances to keep your overall utililization somewhere above zero but below 10% ideally... but didn't expect that I'd have to micro-manage every single account every month.

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From what I have gathered you need 3 cards.  Have two report 0% and have one report less than 9%

As much as I need to rebuild I have gotten to the point of not caring that much about my score as it will flucuate over time as things drop off.  Just waiting for some disputes to go through.  Once I decide to refi or get a mortgage or buy a car I will then worry about the utilization since that does have an impact on your score.

[Anonymous]

Thanks @voltaic... my third card should report a sub 10% utilization balance shortly... so hopefully that gives me a bump.

The funny thing is that after the first drop there were still 2 cards showing small balances. This is just voodoo... I think you're right that watching the scores fluctuate is not productive... the worry is that if I'm close to some boundary for different credit tiers and drop to a lower range because I pay off some cards, then I'm being penalized due to a quirk in the algorithms.

[Anonymous]

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@Anonymous wrote:

@Anonymous @voltaic... my third card should report a sub 10% utilization balance shortly... so hopefully that gives me a bump.

The funny thing is that after the first drop there were still 2 cards showing small balances. This is just voodoo... I think you're right that watching the scores fluctuate is not productive... the worry is that if I'm close to some boundary for different credit tiers and drop to a lower range because I pay off some cards, then I'm being penalized due to a quirk in the algorithms.

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You also have to remember it can take time for the credit companies to report to the credit bureaus, so they might have just reported and then you have to wait for the next statment to see your score updated.

It seems that credit card statements trigger a Fico 8 score update.  I am planning to spread out my statements over the month so I can get more updates throughout the month.  I just got two new cards so I am waiting to see when the statements fall so I can adjust accordingly.

[Anonymous]

Hahaha... just got an alert that my EQ score also dropped... by 9 pts... same reason... balance decrease by 100%!

oh well... 

[Anonymous]

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@Anonymous wrote:

Hahaha... just got an alert that my EQ score also dropped... by 9 pts... same reason... balance decrease by 100%!

oh well... 

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Ha!

Now I am wondering what will happen to mine once I have mine report 0% when the statement gets generated.

[Anonymous]

Is your 3rd card reporting a $0 balance right now? You mentioned that the next time it reports it will show a 10% utilization balance. 

Having all of your cards report a $0 balance is not good for FICO scoring. Ideally, you want all cards reporting a $0 balance with the exception of one that will show a balance. The one you choose to have a balance show on must be 9% or less of the limit. So if you have a card with a $1,000 limit, you want that card reporting no more than $90. 

[Anonymous]

The only time a balance reduction can cause a score reduction is if you go from at least one card having a small balance reported to ALL cards reporting zero balances.  That's the only way.  OP, if this description doesn't match what went on with your profile, I can assure you with 100% certainty that your score drop did not come from paying one of your balances to zero.  It's simply not possible unless that was your only card with a reported balance at the time.

[Anonymous]

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@Anonymous wrote:

I have three open credit cards...   last week I paid one down to zero (previous balance $53.00) and this week I paid down another from $7 to zero balance. 

The first pay down dropped my score 8 pts and the latest zero balance dropped my score 14 points further.

Neither Transunion nor Equifax were affected. 

Does anyone know what could be going on here. The amounts involved are tiny. It's really suprising going to zero balance from such a small balance caused a drop of 22 pts so quickly.

I'm really focused on rebuilding my credit so I'd like to know how this works. I know the general rule is to keep some small balances to keep your overall utililization somewhere above zero but below 10% ideally... but didn't expect that I'd have to micro-manage every single account every month.

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Was this a Fico score drop?

[Anonymous]

@treasurecredit... yeah, scores on myfico.com ... and now all three have dropped with the same reported reason... that my balances have gone to zero!