Re: FICO dropped after I paid off a debt
02-14-2013 03:00 PM
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.
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.