Credit Score dropped 20 points

[Anonymous]

Can someone please explain to me why my Experian score dropped 20 points after I paid off a 150 dollar cc balance. It was only 1% of my total available credit.

[Anonymous]

Are all of your cards now reporting a $0 balance? If so, that’s why. Believe it or not, FICO penalizes for $0 revolving balance. You want to have a small balance report (couple dollars is fine) on at least one card.

[Anonymous]

Yes they are. Wow. That’s absurd. Glad I know now. Thanks for the reply.

[Anonymous]

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@Anonymous wrote:
Yes they are. Wow. That’s absurd. Glad I know now. Thanks for the reply.

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It's really not when you think about it, as the FICO algorithm really has no other way of seeing "revolving credit use" rather than going off of your reported balances.  If you have all $0 reported balances, it looks like you aren't using your credit and therefore aren't managing your revolving accounts, which is why the penalty is imposed.  All you need to do is let a small (say $5) balance report on one of your revolvers and any points you lost will immediately return, so it's really no big deal.