topic Re: Paying off credit card hurt my FICO scores! in Understanding FICO® Scoring

Paying off credit card hurt my FICO scores!

Anonymous — Tue, 28 Aug 2018 19:03:24 GMT

Hi folks, I was wondering if anyone else has experienced this, and if leaving a balance on my card next month will reverse the damage.

I had a $49 balance on my credit card (1% utilization), and when I paid the balance down to $0, my Experian FICO score 8 lowered by 23 points, and my Transunion score lowered by 12 points. The Experian hit dropped my rating on that service from good to fair!

I'm hoping to apply for a mortgage in the next month, so I need my credit score back where it was!

Re: Paying off credit card hurt my FICO scores!

Anonymous — Tue, 28 Aug 2018 19:15:47 GMT

Proof, if I'm allowed to post links

Re: Paying off credit card hurt my FICO scores!

Pikaboo-icu — Tue, 28 Aug 2018 20:53:18 GMT

Welcome to My Fico.

Yes and yes...

Having zero bal on your cards will drop score.

Allowing a small balance to report should bounce it back.

Re: Paying off credit card hurt my FICO scores!

Anonymous — Tue, 28 Aug 2018 20:57:41 GMT

Pikachu is correct, the All Zero penalty.

Re: Paying off credit card hurt my FICO scores!

Appleman — Tue, 28 Aug 2018 21:06:27 GMT

Search AZEO on this forum. All Zero Except One. Let one card report with around a 1% balance to get the score improvement.

Re: Paying off credit card hurt my FICO scores!

Anonymous — Tue, 28 Aug 2018 21:29:45 GMT

@AnonymousHi folks, I was wondering if anyone else has experienced this, and if leaving a balance on my card next month will reverse the damage.

Yes, hundreds of other forum members have experienced this and reported the same thing in threads just like yours. Also yes, allowing a small balance to report on any one of your cards will result in your gaining back exactly the same points that were lost.

Do you have multiple revolvers, or just this one that you paid off? If you have another revolver that has a statement closing date approaching, you could allow a small balance to report on that one rather than waiting an entire month to report a balance on the card you just dropped to $0. This way you'll see your points return faster.

Re: Paying off credit card hurt my FICO scores!

Anonymous — Wed, 29 Aug 2018 00:47:25 GMT

Right on. I did search before I posted, I guess I just didn't use the right terms.

This is the only credit card (revolver) I have. Don't really need more, and I can't afford the inquiry hit for a while.

Re: Paying off credit card hurt my FICO scores!

Anonymous — Sun, 09 Sep 2018 12:26:05 GMT

@Anonymous wrote:
Right on. I did search before I posted, I guess I just didn't use the right terms.

This is the only credit card (revolver) I have. Don't really need more, and I can't afford the inquiry hit for a while.

How many open loans do you currently have? Some mortgage lenders prefer to see three open tradelines on all three reports.

Re: Paying off credit card hurt my FICO scores!

SouthJamaica — Sun, 09 Sep 2018 15:14:53 GMT

@Anonymous wrote:
Right on. I did search before I posted, I guess I just didn't use the right terms.

This is the only credit card (revolver) I have. Don't really need more, and I can't afford the inquiry hit for a while.

I don't really know for sure, in the case of a one credit card profile, whether zero is better or a small balance is better, but I lean towards a small balance being the better of the 2 options. In your case it strongly appears that a small balance is better, so go for it.

Re: Paying off credit card hurt my FICO scores!

Thomas_Thumb — Sun, 09 Sep 2018 23:25:39 GMT

If someone has one card, a small balance is better than none. If someone has two cards, a small balance is better on both than no balance on either. There have been quite a few data points supporting this relative to Fico 8 (such as the OP's) and none to the contrary that I have read. I believe this to also be true for the older Fico mortgage models.

Inverse presented data that indicates small balances on 3 of 3 cards is better than 0 of 3 cards for Fico 8. I have data showing 6 of 6 cards with balances is a lesser penalty on Fico 8 than "no recent activity on revolving accounts". I believe BBS will be presenting some data showing 0 reporting yields a lower score than 100% reporting [going from 0 of 8 up to 8 of 8]. However, his forthcoming AZ test may be influenced by an 850 buffer on two CRAs.

@BBS - it will be interesting to see your Fico 8 summary table with # cards reporting compared to no cards reporting. Please include a note on QTY of other accounts with balances excluding cards.

The older Fico mortgage models - particularly EQ Fico 04 and to a lesser extent TU Fico 04 are more sensitive to # cards reporting than their Fico 8 counterparts. I saw up to a 45 point drop on EQ Fico 04 (809 => 764) going from 2 of 6 to 6 of 6 cards reporting. That's more than twice the typical 15 to 20 point penalty for: "No recent activity on revoving accounts".

Side note: With my file, I see a stronger response to # cards on TU Fico 04 now that I have an inquiry under 12 months on TU. Not sure why - HP is not related to a new account so I would not expect a scorecard re-assignment.

I have not seen much data on 3 of 3, 4 of 4 or 5 of 5 for Fico mortgage scores.

Wish there was more Fico mortgage data to look at comparing # cards with balances to score - including the "no recent revolving activity" penalty. I think Revelate and others tested # cards in detail years ago. It would be interesting to get a link to the raw data with # cards reporting a balance. Unfortunately the other accounts with balances is missing from that equation.

Re: Paying off credit card hurt my FICO scores!

Anonymous — Mon, 10 Sep 2018 03:04:43 GMT

@Thomas_Thumb
@BBS - it will be interesting to see your Fico 8 summary table with # cards reporting compared to no cards reporting. Please include a note on QTY of other accounts with balances excluding cards.

I look forward to seeing that as well. I received an TU alert today (WH) that I went to AZ on revolvers, so my only account with a balance on TU is currently my mortgage. I have no means of knowing if this update hit EX or EQ yet, so I'll probably give it a day or two just to be sure before grabbing a CCT $1 pull on Tuesday or so. I don't want to pull too early and then can't pull again for another 7 days, especially because I will a revolver reporting a balance in about 8 days taking me back to revolver AZEO.