Paid off $3000 on Credit card (Score drops?)

Anonymous · ‎07-11-2016

Hello,

Paying to zero is one of the biggest misconceptions of building a good credit score.

Like BrutalBodyShots said, paying your cards down to $0 will negatively impact your scores. If you are working to improve your scores, always allow a small balance 10% of your cards limit to remain on the card. The credit bureau formulas are looking at your ability at maintaining revolving credit accounts and your ability to pay them on time. Paying down to 0 essentially makes it an inactive account which will result in a small hit to your score.

As mentioned, add a small balance and wait for the update. You should see the return of your 10 points and possibly a small bump past that. In the future, leave a balance of 10% and you'll see an increase greater then losing 10 only to get back the 10.

Best of luck to you.

Anonymous · ‎07-12-2016

I agree with what the person above said, although leaving a 10% balance isn't necessary. Generally anything from 1%-9% will suffice, and likely grab you a couple of points more than if you leave a full 10% as 10%-29% is the next scoring bucket with respect to utilization.

Anonymous · ‎07-12-2016

I appreciate the feedback. By leaving a balance on the card, aren't I going to be hit with monthly interest charges?

SouthJamaica · ‎07-12-2016

@Anonymous wrote:
I appreciate the feedback. By leaving a balance on the card, aren't I going to be hit with monthly interest charges?

By "leaving" they mean letting it report on your statement. If you then pay it off before the due date, there's no interest. Letting it report on your statement, then paying in full, is different than "carrying" a balance over to the next cycle, which does incur interest.

By the way, for score optimization purposes, I think it's best for most of your cards to report a zero balance, and for less than 50% of them to report a small balance.