Score impacts on balance increases vs. balance decreases

[Dragonlady]

I seemingly get immediate alerts when my credit card balances increase (and subsequent FICO adjustments, usually down), but then excruciately slow updates when I pay a large portion of the balance off.   I use a lot of rewards credit cards, so pay bills using the credit cards, then pay off the credit card balances for that statement, but will then pay the following month's bills.   It never ever seems that my pay-offs are ever reflected, so I show continuous high balances, which are not true as there is some point they should be showing at least 50% lower!   Why does it take so long for good news to hit the streets?  EQ seems the worst, they penalize you for every increase, but never give you the points back when the balances go even lower than they were before.

[Anonymous]

I am pretty sure that your problem has to do with the fact that current models of FICO only see the balance that was there when the statement printed.  FICO doesn't see whether you paid your balance in full or not (though future FICO models probably will).

Take this as an example.  Suppose you have a Chase Freedom with a $1000 limit.  You run it up to $500 one month.  Then the statement prints with $500 as the amount owed and that is the amount that is reported to the three credit bureaus.  You then go online and pay that $500.  In the next billing cycle you charge $420.  The statement prints with that amount, which is reported to the CRAs, and a week later you pay that $420 off.  The billing cycle after that you charge $430 dollars... and so on.  From FICO's perspective, you are about halfway to being maxxed out on that card (50%, 42%, 43%, etc.).  But from your perspective, you are constantly paying it down to $0.

Since you seem to like the idea of paying your cards in full, try the following and see what happens.  For all your cards (except one) pay the card to $0 before the statement prints.  Like maybe a few days before the end of the billing cycle.  And don't use the card again till after the billing cycle starts again.  That way all your cards (except one) will be reporting $0.  Then on the remaining card, pay it down a lot before the statement, but just not down to $0.  Pay it down to maybe $20 or so.

You should see a big jump in your score, especially if you keep that up for 60 days.  (That will give it enough time to make sure that you are at all zeros and that you are seeing the score benefit. 

I also encourage you to subscribe to a service that lets you pull credit reports (not scores) from at least two different CRAs and do that a couple times a month or more.  Credit Karma is an example of such a service (and it is free).  Watch your reports to confirm that your CCs are all at zero (except one!).