Help! Huge score drop after paying off credit cards

[BIRDWRITER]

Hi all,

I haven't posted on here in ages, but now I need some advice (or reassurance). In large part to the help from this group, I got my FICO score into the mid-high 700's. Over the past several years, DH and I rehabbed a house, and wound up with huge CC debt--nearly $70K. We sold that house, bought another, and recently sold some other property. After the dust settled, my score was 727. A few weeks ago, I used the proceeds of the property sale and paid off all our CC debt. We still have a mortgage and car lease payments, but all the CC's are paid. Note, I did not close the cards, just paid off. We will still keep them active. Last week, we applied to get preapproved for another mortgage. The credit bureaus had not updated with my payments yet, except for a few small ones, and my score was 717. Today, I got a notice of a change to my reports, and my score dropped nearly 60 points! I immediately checked all my reports, and the only "negative" was the hard pull from the mortgage lender. Still not all the CC's are reporting as paid, but my util dropped from 36% to 16%. Why would I have such a steep drop when I'm paying off debt?

[BallBounces]

What scoring provider and algorithm showed you a 60 point drop?

[Anonymous]

^^^ this - where did you get your scores? Also, if you paid off every card to $0, you will take a scoring penalty for no revolving credit in use. It should be on the order of 5-15 points though. A 60 point drop from paying off debt sounds like a VantageScore modeled-score change.

[BIRDWRITER]

yeah, it was Vantage. Is that not a reliable score?

[BIRDWRITER]

Vantage...

[Trudy]

It is not.  Vantage is different from FICO and FICO is the score(s) most creditors use.  The sites that provide vantage scores are good for report detail only, not scores.  Many people have huge differences between their Vantage and FICO scores.  Some are close.  But most lenders as in > than 90% use FICO scores, definitely MTG lenders.

[BIRDWRITER]

whew, thanks! We got the mortgage preapproval, but I was terrified that this drop would cause problems later. Just out of curiousity, do you have any idea why Vantage's algorythm would peg such a drastic drop to what should be positive changes?

[SouthJamaica]

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@BIRDWRITER wrote:

whew, thanks! We got the mortgage preapproval, but I was terrified that this drop would cause problems later. Just out of curiousity, do you have any idea why Vantage's algorythm would peg such a drastic drop to what should be positive changes?

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Don't even think about it; Vantage is garbage.

If the only change in your reports was a reduction of your overall revolving utilization from 36 to 16%, your FICO scores went up, not down.

[Trudy]

I don't know but their algorithm put's different weight on the same categories weighed by FICO.  Someone might be able to answer but not many study vantage or look for data points since it's not used much.  I would assume you will get those points back when all CC report to the CB's as vantage likes $0 across all and FICO 8 provides a penalty.  I believe anywhere between 15-20 points depending on profile.  So you may want to make sure there is a small balance reports on one card.  $5 is enough to avoid the penalty.  Although I'll let someone else chime in regarding this because I think I recall someone posting FICO mtg scores (5,4,2) benefit from $0 CC for all whereas FICO 8 penalizes.

[CramEiko]

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@SouthJamaica wrote:

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@BIRDWRITER wrote:

whew, thanks! We got the mortgage preapproval, but I was terrified that this drop would cause problems later. Just out of curiousity, do you have any idea why Vantage's algorythm would peg such a drastic drop to what should be positive changes?

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Don't even think about it; Vantage is garbage.

If the only change is your reports was a reduction of your overall revolving utilization from 36 to 16%, your FICO scores went up, not down.

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++1

Totally assuming you picked up your scores from say CK... CK is a great tool to get a general look. It's definately not a reliable resource when it comes to your actual credit scores. I've seen my score on CK go one up +13 and one down -4 (TU/EQ) with the same exact reasoning.