JEZeimer wrote:I'm so frustrated. I've been working on my debt for about 7 months. I started with a TU score of 515 and it's now at 678. But one week ago it was at 685. My "next step" listed on this site was to lower my debt as I had a car loan that was over 20,000 and "most high achievers have debt under $5000". So I took some of my down payment savings and paid off my car. So I have no debt now...and it lowered my FICO. I was trying to get it higher to get a better home mortgage loan. I would never have done that if the "next step" hadn't told me to do so on the site. Why would paying off my car lower my FICO - nothing else has changed? I have two credit cards with 0 balance and outstanding credit limit of $5000. I have nothing in collection. The only "bad" on my report are some old medical bills that went into collection in 2008 - but have been paid and one revolving credit loan my husband took out jointly that he didn't pay on for over 120 days - but I paid it off and it is closed.
I have a guess - You no longer have any active accounts; everything is paid. I bet if you let your card post a 5% balance at statement time you'll see a bump.
JEZeimer wrote:I use the credit cards each month and pay in full at the end of the month. So the cards are active but I don't carry a balance. is it better to carry a balance?
You only pay interest on what you don't pay in full after statement time, but your credit report is not a real-time balance. It's a snapshot from statement time. So if you had 2500 on a 5k card at statement time and pay it off right away, your credit report shows 50% usage and your score will tank. But if you paid 2350 before the statement cut, and then the other 150 after, your credit report would show 3% utilization. And you would still owe no interest.
Below is a link to a graph showing how utilization affects a score.
http://ficoforums.myfico.com/t5/Credit-Cards/CAP-O
Note that for some profiles, the difference between 0 and 5% utilization is up to 30 points.
Lots of other things affect your score. It could be that losing an active trade line did drop you the 7 points. If you compare both reports and the utilization is the same on all CC accounts, maybe it did. If I were you I'd try posting different balances and see what happens. Better to know now before you have a Mortgage app.
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