FICO dropped after I paid off a debt

[Anonymous]

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.  

[p-]

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@Anonymous 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.  

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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. 

[p-]

Also, search here for the term "rebucketing".  Lots of discussion about it.

[Anonymous]

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?

[Anonymous]

Ok that's much more complicated than I was ready for....and they wonder why everyone is so messed up while trying to fix their scores.   I just want to get approved to buy a house!   I've got nothing left to do at this point but wait for my credit usage history to bump the score up.  Everything that can been disputed and paid off has been.   I hate the waiting game now.   Thanks for the information!

[p-]

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@Anonymous 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?

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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-ONE-EXEC-OFFICE/m-p/1816493/highlight/true#M506408

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.

[Anonymous]

Thanks for all the help!   I just put $100 on one of my cc and we'll see what happens.  

[bettercreditguy1]

When, how old is the 120 day late?