topic Re: How does lowering my utilization lower my score?? in Understanding FICO® Scoring

How does lowering my utilization lower my score??

Anonymous — Mon, 30 Apr 2018 14:53:14 GMT

I just got a credit update that my utilization lowered to 2% month over month, when the update came through it also showed that had lowered my Equifax score to 671 (currently my lowest score out of all 3). I don't get it, I thought low utilization was supposed to help or at the very least, not hurt. I'm frustrated with Equifax : -(

Re: How does lowering my utilization lower my score??

sarge12 — Mon, 30 Apr 2018 15:09:20 GMT

@Anonymous wrote:
I just got a credit update that my utilization lowered to 2% month over month, when the update came through it also showed that had lowered my Equifax score to 671 (currently my lowest score out of all 3). I don't get it, I thought low utilization was supposed to help or at the very least, not hurt. I'm frustrated with Equifax : -(

When you get an alert on myfico because of the lower balances it will also generate your latest score. This needs to be considered 2 seperate pieces of info that are not necessarily related. In other words it is saying your balance dropped and your score went down. It does not mean the lower utilization caused the score drop. It is likely that the score dropped because of something else in your pull that did not generate an alert. AZEO with the one being under 29%, and aggregate being under 9% is what you need for best scores. As far as I know there is no points gained by dropping utilization from 8.99% to 2% aggregate, so if your utilization was say 8% and you paid enough to bring it down to 2%, your score would not change for that reason.

Re: How does lowering my utilization lower my score??

Anonymous — Mon, 30 Apr 2018 15:39:36 GMT

I appreciate the insight. I wonder what caused it to drop then?

Re: How does lowering my utilization lower my score??

sarge12 — Mon, 30 Apr 2018 15:53:48 GMT

So do I often wonder what caused my score to change. My Experian fico 09 score went up 11 points in 11 days recently. To my knowledge the only change was 11 days elapsed. I pulled from myfico on the 18 of April and fico 09 score was 825. Then I recieved a free fico 09 update from wells fargo on April 29 and it was 836...no idea as to why the unexpected increase happened.

Re: How does lowering my utilization lower my score??

HeavenOhio — Tue, 01 May 2018 03:27:19 GMT

@sarge12 wrote:
@Anonymous wrote:
I just got a credit update that my utilization lowered to 2% month over month, when the update came through it also showed that had lowered my Equifax score to 671 (currently my lowest score out of all 3). I don't get it, I thought low utilization was supposed to help or at the very least, not hurt. I'm frustrated with Equifax : -(
As far as I know there is no points gained by dropping utilization from 8.99% to 2% aggregate, so if your utilization was say 8% and you paid enough to bring it down to 2%, your score would not change for that reason.

A handful of us here (myself included) have experienced score changes at about 5% overall utilization. That's certainly not the norm, but it's reason to report a very low balance if it's important to eek out every possible point.

But that's not the issue at hand. The issue is that something caused the OP's score to drop, and it wouldn't have been the utilization change.

OP, how many points did you lose?

Re: How does lowering my utilization lower my score??

Anonymous — Tue, 01 May 2018 03:35:17 GMT

@HeavenOhio
OP, how many points did you lose?

Good question, as if the OP did in fact cross a utilization threshold, which would have yielded a score gain, if he saw a score loss it would suggest that the loss came from a more impactful event.

For example, if he lowered his utilization across a threshold that would have gained someone say 15 points on average just to assign a number to the discussion here, if he saw a 10 point loss it would mean that the event/change he's looking for would be something that dropped his score 25 points. That of course would be something pretty major.

Re: How does lowering my utilization lower my score??

Anonymous — Tue, 01 May 2018 13:02:55 GMT

I lost 3 points by lowering my already low utilization.

Re: How does lowering my utilization lower my score??

Anonymous — Tue, 01 May 2018 16:31:50 GMT

@Anonymous
I lost 3 points by lowering my already low utilization.

That's nearly impossible, so I'll be the first to say that if you lost 3 points it was from something else.

If you went from X reported balance to a balance reported lower than X but greater than $0, there is no way that you would have lost any points. Your score would either stay the same or potentially go up depending on if a threshold was crossed. It would not go down.

Re: How does lowering my utilization lower my score??

sarge12 — Tue, 01 May 2018 16:55:22 GMT

@Anonymous wrote:
@Anonymous
I lost 3 points by lowering my already low utilization.
That's nearly impossible, so I'll be the first to say that if you lost 3 points it was from something else.

If you went from X reported balance to a balance reported lower than X but greater than $0, there is no way that you would have lost any points. Your score would either stay the same or potentially go up depending on if a threshold was crossed. It would not go down.

The only cases where I have known of something that known to be is good for a score lowering it instead and that actually being the cause of the score drop is in the rare cases of it causing re-bucketing. I have read of a collection dropping of the report as the only negative causing it, but the score actually dropped significantly. Almost all other cases are the misunderstanding of the idiotic way it shows an alert and the score change that it shows with it. I wish myfico would make it clear on the alert that the shown change in score may be unrelated to the alert. I also wish myfico would just go ahead and either eliminate the simulator or at least make it clear that it is worthless as a predictor of how the score will actually affect the scores.

Re: How does lowering my utilization lower my score??

Anonymous — Tue, 01 May 2018 17:04:38 GMT

I'm thinking it has to be because of a new credit card account being added. But it still doesn't make much sense because I got an alert that the account was added a week before this latest alert that showed my score dropping. Fyi the first alert about the new account did not affect any of my scores.

Re: How does lowering my utilization lower my score??

Anonymous — Wed, 02 May 2018 00:23:47 GMT

@sarge12
The only cases where I have known of something that known to be is good for a score lowering it instead and that actually being the cause of the score drop is in the rare cases of it causing re-bucketing. I have read of a collection dropping of the report as the only negative causing it, but the score actually dropped significantly. Almost all other cases are the misunderstanding of the idiotic way it shows an alert and the score change that it shows with it. I wish myfico would make it clear on the alert that the shown change in score may be unrelated to the alert. I also wish myfico would just go ahead and either eliminate the simulator or at least make it clear that it is worthless as a predictor of how the score will actually affect the scores.

While what you mention regarding re-bucketing is completely true, I don't believe that re-bucketing can occur from a utilization change, so that shouldn't apply to the OP here. I agree 100% with your comment regarding MF alerts and the simulator. Those issues come up on a daily basis, usually multiple times on this forum and it results in grossly mislead members.

Re: How does lowering my utilization lower my score??

Anonymous — Wed, 02 May 2018 00:24:26 GMT

@AnonymousI'm thinking it has to be because of a new credit card account being added. But it still doesn't make much sense because I got an alert that the account was added a week before this latest alert that showed my score dropping. Fyi the first alert about the new account did not affect any of my scores.

Did you lose any points from the inquiry associated with the new account?

Re: How does lowering my utilization lower my score??

Anonymous — Wed, 02 May 2018 00:43:32 GMT

Yes, I lost 2 points when those inquiries hit on April 14th and another point a few days later.

Re: How does lowering my utilization lower my score??

sarge12 — Wed, 02 May 2018 00:46:25 GMT

@Anonymous wrote:
@AnonymousI'm thinking it has to be because of a new credit card account being added. But it still doesn't make much sense because I got an alert that the account was added a week before this latest alert that showed my score dropping. Fyi the first alert about the new account did not affect any of my scores.
Did you lose any points from the inquiry associated with the new account?

I wonder this also BBS...I am not sure that a new credit card account is counted in AAoA, AoYA and utilization until the credit card actually shows activity...it may, but I am unsure. If you recieve a card, and decide that it was a mistake before it is activated, and never does get activated...does it count in these areas? The inquiry is going to affect a score slightly even if declined, but when the actual account is counted, I am not sure of. Since the OP is questioning why his score went down just 3 points, It might have an effect because of the inquiry 1 month, and the new active account the next month. Whatever it is, it does not take much to influence a score 3 points.

Re: How does lowering my utilization lower my score??

Anonymous — Wed, 02 May 2018 00:55:26 GMT

I believe that age of accounts factors are impacted the moment a new account lands on a credit report. A new account will of course land there regardless of whether or not it is used. In your example where the card never gets activated, I still believe the account would show up on one's credit report and thus be factored into the age of accounts factors by the algorithm.

Re: How does lowering my utilization lower my score??

Anonymous — Wed, 02 May 2018 01:08:26 GMT

See, now I'm thinking opening up 2 more accounts wasn't the best for me but on the other hand, I had to start somewhere with my gardening process and only one credit card wasn't going to get me there. I felt like doing this was (and may still be?) A calculated move to increase my credit long term despite the minor credit score hiccups you get when you first open new accounts....

Seems like I'll just have to wait it out and become a credit hobbit again for a while.