792 -> 775 from reducing balance

[DomLS3]

Ok, I get it. Lowering your utilization can sometimes drop your score. I understand that.. but.. 17 points? **bleep**? I had a balance of $342.00 on my BCP which put me at 1% utilization. I decided to pay it off completely, and it dropped my Experian score by 17 points from 795 down to 775. That's ridiculous. Why so much?

[SouthJamaica]

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@DomLS3 wrote:

Ok, I get it. Lowering your utilization can sometimes drop your score. I understand that.. but.. 17 points? **bleep**? I had a balance of $342.00 on my BCP which put me at 1% utilization. I decided to pay it off completely, and it dropped my Experian score by 17 points from 795 down to 775. That's ridiculous. Why so much?

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The only time lowering your utilization would lower your score would be where it led to all your cards reporting at zero. FICO 8 for some strange reason prefers one card reporting a small balance, to none reporting a balance. Don't ask me why. It's ridiculous IMHO.

[DomLS3]

I have 3 cards, 2 which reported at 0. My third card reported at 2,000, so I didn't have all 3 at 0. It seems that just that one card dropping to 0 is what did it. So stupid. I was so close to 800 on Experian. I'm at 799 on Equifax. 

[RobertEG]

The magnitude of the score change may be partially due to rebucketing.

You are in a higher scoring bracket above 760, and changes can result in movement to a different scorecard.

That means scoring in that category is being done under a new algorithm, resulting in lack of direct comparison of impact based on a given change.

[Berk]

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@RobertEG wrote:

The magnitude of the score change may be partially due to rebucketing.

You are in a higher scoring bracket above 760, and changes can result in movement to a different scorecard.

That means scoring in that category is being done under a new algorithm, resulting in lack of direct comparison of impact based on a given change.

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I agree with the above.

From my experience, my score has dropped anywhere from 10-15 points every time I've paid off a signature loan. It recovers quickly. Unless you are in the market for a mortgage or needed car loan, don't worry about fluctuations in your score. If you see upward trends on the graph over the months and years, then you are moving in the right direction. 

[Thomas_Thumb]

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@DomLS3 wrote:

I have 3 cards, 2 which reported at 0. My third card reported at 2,000, so I didn't have all 3 at 0. It seems that just that one card dropping to 0 is what did it. So stupid. I was so close to 800 on Experian. I'm at 799 on Equifax. 

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Relax, take some time off and report back next month with details on accounts and Fico score. Test scoring factors and learn how your profile reacts to those changes. How old are each of your cards, which one is reporting a balance and when did you last use the card that is reporting a balance?

Do you have other, non CC accounts? Did you apply for any new credit CCs or experience any new inquiries due to loan applications?

[Anonymous]

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@SouthJamaica wrote:

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The only time lowering your utilization would lower your score would be where it led to all your cards reporting at zero. FICO 8 for some strange reason prefers one card reporting a small balance, to none reporting a balance. Don't ask me why. It's ridiculous IMHO.

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It's not a "strange reason" it's because FICO 8 wants to see that someone is able to manage revolving credit.  In the eyes of FICO 8, all zero balances reported means no use of revolving credit and thus the score drop.  I don't find this ridiculous at all.  Fortunately, it appears that future models will take into account trended data so perhaps this won't be an issue going forward (for those that have an issue with it).

[Anonymous]

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@RobertEG wrote:

The magnitude of the score change may be partially due to rebucketing.

You are in a higher scoring bracket above 760, and changes can result in movement to a different scorecard.

That means scoring in that category is being done under a new algorithm, resulting in lack of direct comparison of impact based on a given change.

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Rebucketing can occur from one moving from 1 of 3 cards reporting a balance to 0 of 3 cards reporting a balance?  I wasn't aware of that if that's the case.

[Anonymous]

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@Anonymous wrote:

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@SouthJamaica wrote:

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The only time lowering your utilization would lower your score would be where it led to all your cards reporting at zero. FICO 8 for some strange reason prefers one card reporting a small balance, to none reporting a balance. Don't ask me why. It's ridiculous IMHO.

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It's not a "strange reason" it's because FICO 8 wants to see that someone is able to manage revolving credit.  In the eyes of FICO 8, all zero balances reported means no use of revolving credit and thus the score drop.  I don't find this ridiculous at all.  Fortunately, it appears that future models will take into account trended data so perhaps this won't be an issue going forward (for those that have an issue with it).

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Yeah, that's it BBS.  It's hard to always remember but FICO 8 was developed 10 years ago.  For almost all of FICO's history there was no way to distinguish between Bob, who hasn't used his credit cards in five years, and Fred, who uses them all the time but just didn't use them last month.  For Fred to have no derogs and a low utilization is a much more powerful thing in his favor than if Bob has the same.  That's because, for many years, all the CRAs included in their database was the last snapshot (typically the last month) of CC balance data (and no record of payments).  So the only way FICO could flag a person as a CC user is if one of his cards showed a balance.

But now the CRAs are collecting trended data -- where anyone looking at your report can see month by month, stretching back a good 30 months or more, what your balances were each month and what your payments were.  So future scoring models will be able to easily detect whether a person is a regular CC user even if his card balances are always reporting $0.  (The payment data will answer that question.)

[SouthJamaica]

Having credit available to one, and not using it, is NOT a risk factor.

IMHO the reason FICO penalizes that state of repose is that someone who doesn't need to borrow is not a profit maker for banks.