topic Re: Score drop after balances decrease in Understanding FICO® Scoring

Score drop after balances decrease

Anonymous — Tue, 05 Sep 2017 13:05:30 GMT

I'm in the middle of a re-fi and qualified with a middle score of 695. One of my authorized user accounts was recently paid off. This decresed my DTI and my CC utilization. But when I ran this through the simulator the score dropped. Why the heck does that happen?

Re: Score drop after balances decrease

Anonymous — Tue, 05 Sep 2017 13:48:48 GMT

It sounds like you have already done this, but the altered balance has not yet materialized on your credit reports. While you are waiting for that to happen, you have run the change through a simulator, which is predicting a score drop. Is that right?

Which simulator was it? All simulators are unreliable to some extent, but some are worse than others. And is it the mortgage score that is being simulated -- or is it FICO 8?

Once the new $0 balance appears on your reports, will all your credit cards be reporting $0? If so, that will certainly cause a score drop. (This will happen even if you have a charge card reporting a positive balance -- charge cards are different from credit cards.)

Re: Score drop after balances decrease

Anonymous — Tue, 05 Sep 2017 21:06:47 GMT

The only time paying down balances can result in a score drop is when all balances reported are $0. If you paid off that one account but still had an account with a balance on it, paying down that one account was not the reason that your score dropped.

Re: Score drop after balances decrease

Anonymous — Mon, 19 Feb 2018 07:26:44 GMT

Ok so I got alerts saying my balance “decreased” and my score dropped. I see no other factors for drop points. If it was not do to paying down my balance, then why does the alert suggest paying down my cards resulted in dropped poInts.

My utilization is never 30% I remain between 3-9 percentage utilization and maybe 6% overall so why the drop points.

Re: Score drop after balances decrease

Anonymous — Mon, 19 Feb 2018 15:24:50 GMT

@AnonymousOk so I got alerts saying my balance “decreased” and my score dropped. I see no other factors for drop points. If it was not do to paying down my balance, then why does the alert suggest paying down my cards resulted in dropped poInts.

My utilization is never 30% I remain between 3-9 percentage utilization and maybe 6% overall so why the drop points.

Great question and definitely a common one. When you receive an alert, it's simply letting you know that something changed on your credit report. Whatever that change is may or may not result in a score change. At the time you receive an alert, you also receive an updated score. it's crucial to realize that the alert you received and the score change often have nothing at all to do with one another. It's very natural to assume that they are tied together, but many times they are not. In your case, I am 100% certain that your balance pay down had nothing to do with your score drop, as your utilization is still a non-zero number in the single-digits.

Re: Score drop after balances decrease

HeavenOhio — Mon, 19 Feb 2018 17:59:55 GMT

To give an example, I recently received an alert for a balance increase. Accompanying that alert was a score increase. Balance increases never cause score increases unless you're increasing from all cards being zero. In my case, the score increase was likely due to inquiries becoming unscorable, accounts aging to a year old, or a combination of both. There are times when the reason for a score change isn't so easy to pinpoint, though.

Re: Score drop after balances decrease

Anonymous — Sat, 10 Mar 2018 19:05:43 GMT

After months of nothing but score increases and now every alert since Feb 2018 shows a score drop I am beginning to think that something may not be right with the website. My score is dropping for paying down (not off) balances. It concerns me even more that when I called myfico they could not explain it.

Re: Score drop after balances decrease

Anonymous — Sun, 11 Mar 2018 01:13:06 GMT

@AnonymousMy score is dropping for paying down (not off) balances.

No it isn't. It may seem or appear that way, but I can assure you that's not the case. FICO scores cannot drop from paying down (but not off) balances. They would either stay the same or go up, depending on if any thresholds are crossed.

Re: Score drop after balances decrease

Anonymous — Mon, 11 Mar 2019 10:43:16 GMT

I just received this same Alert from MyFICO. I got a balance DECREASE alert and I also got an alert that my Equifax score had dropped 30 points. My credit card account reported that the balance went from $326 to $303 and it said that my score dropped 30 points because of this $23 balance decrease.

Re: Score drop after balances decrease

SouthJamaica — Mon, 11 Mar 2019 13:58:10 GMT

@Anonymous wrote:
I just received this same Alert from MyFICO. I got a balance DECREASE alert and I also got an alert that my Equifax score had dropped 30 points. My credit card account reported that the balance went from $326 to $303 and it said that my score dropped 30 points because of this $23 balance decrease.

It did NOT say "because of", did it?

Re: Score drop after balances decrease

GApeachy — Mon, 11 Mar 2019 14:35:37 GMT

@Anonymous wrote:
I just received this same Alert from MyFICO. I got a balance DECREASE alert and I also got an alert that my Equifax score had dropped 30 points. My credit card account reported that the balance went from $326 to $303 and it said that my score dropped 30 points because of this $23 balance decrease.

Directly under your scores MyFico states, "Your score may be affected by additional information in your credit report" . If you wait a few days and pull your report(s) from say CK, Exp, TrustedId, etc. more than likely you'll be able to find the condition(s)/item(s) that actually caused that particular change. Not always but more than likely you can pin it down....you just gotta dig.

Re: Score drop after balances decrease

Anonymous — Tue, 12 Mar 2019 03:11:50 GMT

@Anonymous wrote:
My credit card account reported that the balance went from $326 to $303 and it said that my score dropped 30 points because of this $23 balance decrease.

It did not say that. You're making the assumption that the alert reason (reported balance drop) and the score provided at the same time are related, when in fact these two things have nothing to do with each other.

I really wish MF would start putting a disclaimer on this. It's fine that it states that your score may be impacted by other events, but I'd guess that easily dozens of MF members every day are wrongly mislead by the current alert/score system. It should very simply state under the alert reason and score change, "The alert reason provided above may not have anything to do with your updated score provided" or something similar.

Re: Score drop after balances decrease

Anonymous — Wed, 24 Apr 2019 17:56:43 GMT

The same thing just happened to me, that's how I found this posting on the forum. After reading a bunch of things on the internet, I found one explanation that actually satisfies me:
From https://www.doughroller.net/credit/7-things-cause-credit-score-fluctuate-month-month/ :
"Scorecard Hopping
Another explanation to changes in a credit score is that you may have been placed in a new scorecard. Called, scorecard hopping, this occurs when FICO places a consumer in a new scorecard. FICO doesn’t simply lump every consumer into the same pot and evaluate us all equally. They put us in what they call different scorecards.

FICO provides very little information about its scorecards. One scorecard that most believe exists, however, is for those who have a bankruptcy on their record. Scorecards enable FICO to evaluate the risk of similarly situated consumers. Your credit score depends in part on which scorecard you are in (and there’s no way to know which one

Now, scorecard hopping occurs when FICO moves a consumer from one scorecard to another. For example, if a bankruptcy is removed from a consumer’s credit file, they will be moved out of the bankruptcy scorecard into another scorecard. What’s interesting here is that even though you might get moved into a better scorecard, your credit score can actually move lower as a result of that change.

Why? Because you are now being compared to a different group of consumers. You may have done well when compared to others who have filed for bankruptcy. After the scorecard hop, however, you are now being compared to a very different group of consumers. Long term the switch should help, but in the short term it can lower your score."

Re: Score drop after balances decrease

CuriousGeorge_77 — Mon, 08 Jul 2019 17:39:15 GMT

I have not found this to be true. I recently showed a balance DECREASE of $250 (across all cards), which reduced my score by 1 point. The following month, my balance INCREASED by $307 and lowered my score by 13 points. Incidently, this are mid-cycle balances. All of my cards are paid off in full every month. You would think the geeks at FICO could figure out a more sophiticated system. So disappointed such a sloppy and inaccurate system is used in so many aspects of modern life.

Re: Score drop after balances decrease

Anonymous — Tue, 09 Jul 2019 01:43:04 GMT

@CuriousGeorge_77 wrote:
I have not found this to be true. I recently showed a balance DECREASE of $250 (across all cards), which reduced my score by 1 point.

Incorrect. Perhaps you have not read the replies in this thread to others like yourself that have stated that a balance decrease dropped their scores. In none of these examples did the balance decrease drop Fico scores. All of you are being mislead by the score change provided at the time of your alert by assuming that the score change is related to the alert reason. It isn't and it's very important to understand that.

Re: Score drop after balances decrease

Anonymous — Tue, 09 Jul 2019 03:27:14 GMT

I'm not sure about MyFico, but there's an issue with Experian with a delay in alerts. I check my report every day. I will see a decrease in balance, but it will not trigger an alert until a day or 2 later, and I won't receive an email until a day or 2 after that. If I were only relying on emails, I would get an email alert, log in and see TODAY'S score, but an alert that was actually triggered 3 or 4 days ago. Depending on what you have going on with your reports, 3 or 4 days could change your score a good bit. Not to mention, a lot of things that affect score do not trigger an alert at all. Just something else to take into consideration.

Re: Score drop after balances decrease

Anonymous — Sun, 07 Jun 2020 17:00:59 GMT

THANKS for the info on here........!

Re: Score drop after balances decrease

ridgebackpilot — Sun, 07 Jun 2020 16:51:23 GMT

@Anonymous wrote:
This score drop is a joke. I used your simulator, looked at what should happen if I paid off my credit cards and my score went UP. So, I paid them off and my score DROPPED. I'm getting ready to lease a new car and now I went from 770 to below 750. This entire system is nothing but a pain in the ass scam built to torture people and benefit the predatory credit companies. If your website is providing information it should be ACCURATE information. And this bull**bleep** system, which is obviously rigged, needs serious change.

The fact that you don't yet fully understand how the FICO system works doesn't mean the system is rigged!

I'll admit that the way scores are reported is often confusing. It's sometimes difficult to attribute a score change to a particular cause. But with experience, you'll learn to interpret changes more accurately.

For example, it's well-known that paying all credit card balances completely off will result in a score decrease. That's why abundant posts here recommend paying off all cards EXCEPT one. Keeping overall credit card utilization below 9.8% (but not zero) helps maximize your scores.

Finally, you're probably worrying unecessarily about your scores with respect to leasing a new car. Recent experience has shown that even your reduced scores are likely good enough to qualify you for Tier 1 financing, including Zero Percent APR offers. Car manufacturers are hurting and they're motivated to sell and lease cars. I doubt you'll have a problem. Good luck!

Re: Score drop after balances decrease

smittyb — Mon, 08 Jun 2020 23:01:43 GMT

I watched my VANTAGE 3 score drop 13 points when. When I went from 50% UTI to < 30%. UTI.

The simulators told me it would and I thought they were crazy, but it did.

I just posted on here earlier today:

My TU Vantage 3.0 score was 695 yesterday and I paid down a card from 50% UTI to 28% UTI and they changed my score to 683 citing that my number of accounts above 50% UTI decreased by 1.

(WalletHub)

Conversely, MY Experian FICO 8 score went up 14 and all my Experian scores increased form 5-16 points.