topic Re: Decrease in my credit score! in Understanding FICO® Scoring

Decrease in my credit score!

Anonymous — Mon, 22 Mar 2021 15:42:39 GMT

Good Morning everyone,

What's frustrating to me is the fact my credit score from Equifax and Experian has decreased 15 & 16 points. That's because I paid my credit card balance off a couple of days ago. Now correct me if I'm wrong I was always under the impression that having a 0 balance was a good thing. When I called to verify what's going on because I was not understanding this decrease, I was told by the agent that having a 0 balance is bad in the credit world because there's no activity. He suggested that I always keep a low balance instead of paying the credit card off. Has this happened to anyone else?

Re: Decrease in my credit score!

tooleman694 — Mon, 22 Mar 2021 16:10:19 GMT

Yup there is a penalty if all the cards are zero. You need at least one card with a small balance. But you only need to do this if you are about to pull your credit.

Re: Decrease in my credit score!

Anonymous — Mon, 22 Mar 2021 16:16:22 GMT

Thanks for responding. And what do you mean by "pull your credit?"

Re: Decrease in my credit score!

tooleman694 — Mon, 22 Mar 2021 16:28:06 GMT

Like if you were getting ready to buy a house or car, id let the credit card report something.

Re: Decrease in my credit score!

SouthJamaica — Mon, 22 Mar 2021 18:01:09 GMT

@Anonymous wrote:
Good Morning everyone,

What's frustrating to me is the fact my credit score from Equifax and Experian has decreased 15 & 16 points. That's because I paid my credit card balance off a couple of days ago. Now correct me if I'm wrong I was always under the impression that having a 0 balance was a good thing. When I called to verify what's going on because I was not understanding this decrease, I was told by the agent that having a 0 balance is bad in the credit world because there's no activity. He suggested that I always keep a low balance instead of paying the credit card off. Has this happened to anyone else?

If all revolving accounts report a zero balance you get the "all zero penalty". If you let just one card report a small balance before you pay it off, the penalty goes away.

Re: Decrease in my credit score!

ChiknNuggz — Mon, 22 Mar 2021 18:07:39 GMT

Its due to utilization. Its only once a month snap shot of your credi card use. Next month let a couple dollars report and then pay off the balnce so you dont have interest and you will gain the points back. Like the other person said you dont always have to do this unless your going to have your credit ran for something.

Re: Decrease in my credit score!

designated_knitter — Mon, 22 Mar 2021 19:12:29 GMT

Just how big is the penalty? I realize that it is definitely a YMMV thing but a range would be nice.

Depending on your credit scores 15 points is a pretty big deal and could easily be the difference between average and good or good and excellent.

thanks in advance for any wisdom.

Good luck, OP! I, too, would be frustrated to work hard to pay off all my CCs only to take a score hit for doing the fiscally responsible thin!

Re: Decrease in my credit score!

tooleman694 — Mon, 22 Mar 2021 19:56:10 GMT

I think my Wife lost something like 20 points on her Fico 8 when they all went zero. That said they are still zero, and even with a mortgage pull coming, her scores are in the 700s. So we don't really care.

Re: Decrease in my credit score!

Anonymous — Mon, 22 Mar 2021 20:31:57 GMT

But wouldn't the penalty come back when the credit card reports the new 0 balance for the next month?

Re: Decrease in my credit score!

Anonymous — Mon, 22 Mar 2021 20:38:10 GMT

That's the exact word the telephone said to me, utilization. So basically I should use my credit card on a purchase, but not pay the entire balance off correct? Always leaving a small balance on the account. That's what the agent suggested.

Re: Decrease in my credit score!

Anonymous — Mon, 22 Mar 2021 20:42:09 GMT

Her credit score must of been pretty high already if after 20 points being deducted for penalty it's still in the 70's. I'm almost there

Re: Decrease in my credit score!

tooleman694 — Mon, 22 Mar 2021 20:48:11 GMT

Yeah hers is very high, she has enough points to not have to play the AZEO game. Me on the other hand, I must play that game. And I am terrible at it.

Re: Decrease in my credit score!

Anonymous — Mon, 22 Mar 2021 20:49:08 GMT

The penalty was the 15/16 points deducted from my credit score. And yes that's a very big deal. Good credit is everything and says a lot about a person's financial maturity/responsibility. I know it's crazy to think that being responsible and paying off your credit cards would get a person a penalty. I couldn't believe it. But that's how creditors keep us in debt

Re: Decrease in my credit score!

Jordan23ww — Thu, 25 Mar 2021 06:04:38 GMT

Yep, happened to me last May! I had been carrying a balance on 4 cards for years. I was so excited to pay them off. As soon as the final $0 balance reported I lost 12-15 points on all 3 bureaus.

Now I follow All Zero Except One (AZEO) and let $5 to $20 report on one card each month and I no longer get penalized (I do the same for my wife's cards too so neither of us get a score penalty for authorized user cards either).

Wish they'd adjust the algorithm to eliminate the $0 balance penalty. Does seem so backwards. I used to get penalized for high utilization. Couldn't believe I was now getting penalized for 0% utilization too!😩😔

Checkout these screenshots also on this topic!

Re: Decrease in my credit score!

Jordan23ww — Mon, 22 Mar 2021 21:09:54 GMT

@ChiknNuggz wrote:
Its due to utilization. Its only once a month snap shot of your credi card use. Next month let a couple dollars report and then pay off the balnce so you dont have interest and you will gain the points back. Like the other person said you dont always have to do this unless your going to have your credit ran for something.

So when I've let all cards report a $0 balance I take a score penalty. I've wondered if you consistently report $0 balances month after month and never let a small balance report do you just keep losing additional points each month? Does the penalty ever reach a point where it just stops? Do you or anyone happen to know?

Re: Decrease in my credit score!

Jordan23ww — Mon, 22 Mar 2021 21:18:22 GMT

@tooleman694 wrote:
Yeah hers is very high, she has enough points to not have to play the AZEO game. Me on the other hand, I must play that game. And I am terrible at it.

One thing that has helped me is I set up a small reoccurring bill on one of my cards and one of my wife's. The bill is less than $20.

Each month a couple of days after the charge posts I pay all but $5 of it off. That way something always reports for both of us. Then after I see my score has been updated for the month I usually pay the $5 off a few days later so I never end up having to pay interest. I repeat this process each month.

Re: Decrease in my credit score!

Anonymous — Mon, 22 Mar 2021 22:10:01 GMT

Will report I knew better and paid to zero all my credit cards and the scores took a 20+ point score decrease! After leaving a small balance I was able to get my points back. Just had to try it! Well now I believe it. Others posters have already reported the effects of zero reporting so you know!

Re: Decrease in my credit score!

SouthJamaica — Mon, 22 Mar 2021 22:51:36 GMT

@Anonymous wrote:
That's the exact word the telephone said to me, utilization. So basically I should use my credit card on a purchase, but not pay the entire balance off correct? Always leaving a small balance on the account. That's what the agent suggested.

No. Pay it off completely, just pay it off after rather than before it reports, on one card. [The reporting date is usually, but not always, the statement date. Depends on which lender you're talking about]

Re: Decrease in my credit score!

SouthJamaica — Mon, 22 Mar 2021 22:53:16 GMT

@Anonymous wrote:
The penalty was the 15/16 points deducted from my credit score. And yes that's a very big deal. Good credit is everything and says a lot about a person's financial maturity/responsibility. I know it's crazy to think that being responsible and paying off your credit cards would get a person a penalty. I couldn't believe it. But that's how creditors keep us in debt

The FICO insiders say this about it (but I don't believe them):

"The data shows that having 0% utilization is slightly riskier than having a low utilization. Having low utilization is an indication that you have credit and are using it responsibly."
https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/We-re-Tom-Quinn-amp-Tommy-Lee-FICO-Score-Experts-Ask-us-anything/m-p/6137466#M176974

Re: Decrease in my credit score!

Anonymous — Tue, 23 Mar 2021 02:21:16 GMT

@Jordan23ww wrote:
So when I've let all cards report a $0 balance I take a score penalty. I've wondered if you consistently report $0 balances month after month and never let a small balance report do you just keep losing additional points each month? Does the penalty ever reach a point where it just stops? Do you or anyone happen to know?

It is only a single point in time penalty that is either there or isn't. It's either A or B / black or white; there are no gray areas. If you go from not taking the penalty to taking it, the only direction you can then go is back to not taking the penalty (when a non-zero balance reports). Rolling with all $0 reported balances month after month after month will not result in any additional scoring penalty, as that penalty was already being realized the first time all $0 balances were reported.