How is this possible? I paid down one of my credit cards to 1% utilization - Score Dropped!

[Anonymous]

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@HeavenOhio wrote:

It's the phrasing. The statement doesn't lead one to consider that the reason for the score change might not be tied to the alert at all. The system sets people up for unnecessary confusion and frustration, and it causes them to draw incorrect conclusions.

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I agree 100% HO.  Just the fact that we see almost a thread daily regarding this topic proves how misleading the wording is.  What I fear most that I touched on above is that there are a ton of people that don't post about these things and go on with life incorrectly believing an alert caused their score change.  For example, they pay off a credit card and get an alert and see that their score dropped, but it dropped from something else.  Then they are lead to believe that paying off cards drops your score, so perhaps they carry balances unnecessarily as a result going forward, thus costing them money in interest. 

[rprisco]

OP, just wondering if you have any previous bad marks? When I had a bk on my eq report score was higher at about a utilization of 14%, as I paid card down, below that the scores dropped as well. The bk fell off Nov 1 and score went from 698 to 763 with 8% util reporting by then and then it shot further to 774 after I paid down to 1%.

Thus the basis for my question.

[Anonymous]

I was just getting ready to post the same question. I hope you won't mind if I ask on your thread instead? (More knowledge in one place)

I had a balance of $24 that I paid off, and my score dropped 41 points....

After reading this thread, I’m thinking my situation had to do with the 3 hard pulls from Cap One 10 days ago. Though Experian had already taken a point away from me at that time. My new credit card account hasn't showed up on my reports yet either. I'm curious if my score will climb back up a bit after that happens?

I'm really curious to see what others have to say...

[Anonymous]

Judging by your negative reason code displayed above, paying down that $24 to $0 caused you to report all $0 balances, which is known to drop scores on average 15-20 points.  The 3 HPs from CO are 1 per bureau, so when we're looking at EX here you really only had 1 inquiry that could potentially impact that score in question.  A single HP on EX at most I would think could go for 8-10 points.  That being said, combining that with the 15-20 points from reporting all zero balances, you're looking at a 23-30 point drop from these factors.  You still lost another 11-18 points, so again there is another variable here that's not being seen that adversely impacted your score IMO.  I think between dropping to all $0 balances and the inquiry you've found the bulk of it, though.

In order to get back the 15-20 points lost from reporting all $0 balances, simply allow one of your credit cards to report a small balance, such as $5.  You'll instantly get back those points once this happens.

[Anonymous]

Thanks for your insight. i understand now. I took notes for future reference as well.
I’m not sure what the “other variable is that's not being seen that adversely impacted my score,” but knowing where the bulk of it came from is good enough.
I’ll do that, let $5 report. My discover card closes on Dec 4. I should get some points when the new Cap One account shows up too

[Anonymous]

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@brickie74 wrote:
Thanks for your insight. i understand now. I took notes for future reference as well.
I’m not sure what the “other variable is that's not being seen that adversely impacted my score,” but knowing where the bulk of it came from is good enough.
I’ll do that, let $5 report. My discover card closes on Dec 4. I should get some points when the new Cap One account shows up too

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I am unsure what the text in green means.   Are you saying that you expect to get some points for having a positive balance on the Discover -- and then yet more points when your Cap One shows a positive balance too?

If so, that's a mistake.  The "all cards at zero" penalty is removed when one card shows a positive balance.  You do not get extra points for having two accounts with a positive balance.  In fact, exactly one account is ideal and the more accounts with balances after that can lower your score.

[Anonymous]

Im sorry, i should have worded that better. The 3 hard pulls were for Cap One Venture. I was approved for 10k, but that hasn’t appeared on my reports as of yet.
I’m thinking when it does, it should raise my score a bit, correct?

[Anonymous]

It will be your third credit card, right?  So three cards are substantially better than two (since you will then be able to keep most of your cards at a $0 balance).

It's conceivable that the harm done by the new card to your AAoA and to your Age of Youngest Account will outweigh that benefit in the short term, but in the medium to long term the third card was certainly the right choice.

[Anonymous]

Correct, this will be my third card.
I see, it’s good to know. Now, i just have to remain patient and watch it grow

[Anonymous]

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@brickie74 wrote:
Im sorry, i should have worded that better. The 3 hard pulls were for Cap One Venture. I was approved for 10k, but that hasn’t appeared on my reports as of yet.
I’m thinking when it does, it should raise my score a bit, correct?

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It's tough to tell by your wording, but it depends on why you believed your score would increase.  You mentioned the $10k limit.  It's important to understand that increase credit limits don't mean better credit scores.  Utilization is what matters and since you're already exhibiting fantastic credit behavior by being at 1% utilization, adding another $10k of available credit is going to keep your utilization at 1%.  This means that you won't see any score change at all related to your increased available credit, as utilization is what influences scoring and it will remain the same for FICO scoring purposes.  What IS nice, though, is that with your dramatically higher available credit you can allow a larger balance to report.  Instead of just $5, for example, you could allow a balance of say $800-$889 report on that Capital One card and it shouldn't result in any scoring drop.