Score drop after paying off credit card?

[irunfromcredit]

Hi All:

I'm pretty new to the whole "credit game," and had a question about utilization and optimizing scores.  

I've read on the boards that reporting utilization between 1%-9% is best for scoring.  Late March, early April I paid off my car loan and all my credit cards, well I let one or two of my cards report around 5%.  I had one card that was slow at reporting as paid and this morning it finally reported on my experian as paid. It took that card's uti from 47% to 0.  Also, with the timing, Chase reported two of my cards paid (I let the balance report, then I PIF and then Chase reports to 0).  Anyhow, my Experian scored dropped 16 points.  My Experian score before the drop was 763.  

So my question is, does this point drop really make a difference?  And I'm thinking about just letting my balances report as is when the my statement closes (I have been paying down my balances to 1-5%).  Would letting my balances report at 10-20% make that much of an impact on my score?

Thanks again for any input!

[Anonymous]

A few things.  One, do you have another installment loan aside from the car loan that you just paid off?  If not, paying off the car loan and not having it on your report as an active installment loan could be the reason for your score drop, not the utilization amounts.

As far as utilization and scoring goes, it's impact is felt month to month.  That said, any points "lost" or "gained" due to utilization would be exactly "gained" or "lost" the following month if you returned all of your balances exactly back to where they were. 

I'm not sure how many CC's you have active currently, but general concensus is that all should report a zero balance except for one with that one reporting 1-9% of your credit limit on that card.  If you have say 5-6+ credit cards or more, having two report 1-9% balances would be fine as well as far as I know.  That would be the best way to maximize your FICO points for utilization.

[Anonymous]

So my question is, does this point drop really make a difference?

Not really. 750 is still a strong score.

[SouthJamaica]

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@irunfromcredit wrote:

Hi All:

I'm pretty new to the whole "credit game," and had a question about utilization and optimizing scores.  

I've read on the boards that reporting utilization between 1%-9% is best for scoring.  Late March, early April I paid off my car loan and all my credit cards, well I let one or two of my cards report around 5%.  I had one card that was slow at reporting as paid and this morning it finally reported on my experian as paid. It took that card's uti from 47% to 0.  Also, with the timing, Chase reported two of my cards paid (I let the balance report, then I PIF and then Chase reports to 0).  Anyhow, my Experian scored dropped 16 points.  My Experian score before the drop was 763.  

So my question is, does this point drop really make a difference?  And I'm thinking about just letting my balances report as is when the my statement closes (I have been paying down my balances to 1-5%).  Would letting my balances report at 10-20% make that much of an impact on my score?

Thanks again for any input!

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Having all accounts report at zero costs you some points.

Having all but one report at zero, with the one reporting at 9% or less, gives you some points.

IMHO it doesn't matter much if your overall credit card utilization is 6% or less.

Where it might matter is if you want to add a few points in anticipation of an upcoming credit application.

[RobertEG]

Since the answer to that question is the infamous "it depends on your inividual profile," and since utilization scoring retains no historical memory, now is the ideal time to do some experimenting.  Try a few different closing % utils and gather a bit of data.  You then have an approx. idea of impact when you tweak.

Thereafter, you dont have to tweak each and every month.

As long as you maintain balance levels that will permit, at any time you are ready to actually use your score, to tweak for max util scoring, you dont have to take the time and effort to tweak each and every month, and will have an approx idea of what score difference you can likely achieve.

[irunfromcredit]

Thank you everyone for your input and suggestions!!

To answer the questions: I have quite a few student loans, which is the reason for paying everything off. Have been throwing money at paying down my loans.

I do use about 4-5 cards during the month and only let one card report 1-5% and let my Amex report. It just happens that as of this morning my report updated with my cc balances at 0. I have 3 cards currently with balances and I'm thinking of just letting them report as is when the statement closes to see what happens. One card should report at about 25% uti.

Ideally I want to purchase a new place in the next year and am hoping to get the best rate possible. So while I wait, I want to try and increase my scores as much as possible while paying down my student loans, saving money, and letting some cc's age.

Thanks again!

[RonM21]

Sounds like you are on the right track, and using the suggestions here to your advantage. You should be well on your way to getting a new place with scores you desire.