FICO score plummets 37 points with zero balances, no loans, perfect payment history

[NGriffith]

My generation likes to be debt-free, especially in this economy.

[NGriffith]

Thanks.  Seems FICO needs to generate income via debt.

[Vinjints]

Is not a slow recovery. You get those points back as soon as you have one card report. 

Nor is Fico generating income. You don't have to pay interest. Just let a balance report and then pay it off before the due date. 

[Thomas_Thumb]

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@FicoMike0 wrote:

As the others said, all zero penalty is real. I thought it was about 20 points, 37 is a new data point.

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Agreed, typical drop if all cards report $0 balance is 15-25 points. This 37 point outlier suggests something else is also at play. If the OP has an AU card and it also reported $0, that also has a penalty.

[BrutalBodyShots]

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@Varsity_Lu wrote:

Yep, you get penalized for not having any debt.  It don't make no sense, but hey, it's just a game, and despite the score drop, you are winning.  

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I don't think that's the right way to frame it. It's not being penalized for "not having any debt" really, as that implied that having debt is "good" for scoring. As you are well aware, this penalty can be avoided without paying a penny of interest simply by using your credit cards the right way (paying statement balances in full monthly). This is an important distinction.

The penalty exists because it assumes people do pay their credit cards the right way... so if they have no reported balances it means they aren't using any of their cards. People that having cards sitting around unused likely have the mentality that "credit cards are for emergencies!" and those are precisely the type of people that will max cards out in a pinch, not pay them back, and default. It makes perfect sense to me that such an individual would statistically be a greater risk for default, so I don't agree with the "it don't make no sense" take when I hear it.

[Thomas_Thumb]

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@NGriffith wrote:

Yes but paid it off entirely before due date.

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Allowing a balance to report on a statement and then paying it off before due date won't result in the "no recent revolving activity" penalty - unless the only card reporting was an AMEX charge card or an AU account.

What was the statement balance and CL on the card(s) that reported a balance subsequently paid by due date(s)? 

P.S. Fico is not a lender and therefore receives no money associated with interest payments on loans or CCs. Their revenue stream comes from use fees associated with Fico scoring algorithms. Furthermore, as mentioned above, reported balances are only subject to interest when not paid in full by due date.

[NoHardLimits]

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@Thomas_Thumb wrote:

Allowing a balance to report on a statement and then paying it off before due date won't result in the "no recent revolving activity" penalty - unless the only card reporting was an AMEX charge card or an AU account.

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There is one more exception that I am aware of.  If the card is issued by Chase Bank, and the balance is paid to zero after the statement cuts, Chase will re-report the account as having a zero balance.  This can be good or bad depending upon your personal profile.  I happen to like this variable as it allows me to control what/when balances show for my Chase cards.

[NGriffith]

Don't know what an AU card is.  By coincidence 3 (1 AmEx, 2 Citi) cards all hit zero balances at the same time.

[NGriffith]

In my case, 3 cards that hit zero balances at the same time are used every week.  Just that the payment zeroed the balances at the same time.  I don't have a clue when FICO or credit bureaus check the balances on cards.  But one thing I will do is stagger my payments that zero the balances so that at least one card will have a non-zero balance.

[Vinjints]

Most every lender will provide your current statement balance to the bureaus about 5 days after your due date. You can pull your report and see the dates that each card is updating.