Yes you do get a penatly for having all cards report 0, adding that balance back will definitely help you be sure it's on your BANK card and yes losing that vehicle part will ding you too but as stated it will bounce back after the new one reports as well so you should be a-ok! 
@Anonymous wrote:My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.
If you're asking for someone to defend it, I have no defense for it.
But if you're asking for some speculation as to what happened :
1. By refinancing your auto loan you damaged some of your scores; you went from a mostly paid down loan, which is like rocket fuel to some of your scores, to having no open loans, which causes a point loss for 'credit mix'.
2. When the new auto loan reports you'll probably lose a few more points for a mostly unpaid loan showing up.
3. When you paid the only credit card balance to zero, and it reported, you got the "all zero" penalty. (That can be quickly eliminated by letting a small balance report on one of your cards).
4. In order to keep AZEO on your cards you need to let all your cards report a zero balance except for one bank card (not a store card, and not a credit union card) which reports a small balance before you pay it off. If you use a Chase card for the balance-reporting card, make sure never to pay it to absolute zero, because if you pay it to zero Chase will report the zero balance mid-cycle.
@Anonymous wrote:
@Anonymous wrote:My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.
Yeah it doesn't make a whole lot of sense, but that's how the scores are put together -
You get penalized for COMPLETELY ZERO usage on revolving credit, because none of the score data prior to FICO10 (not in use yet) was based on trended data - ie data in your credit file over time. Score models assumed that ALL zeros on your credit report meant you weren't using your revolving credit at all. Penalty.
You get penalized for having TOO MANY balances, even if they're small. TOO Many balances, Penalty.
You get penalized for NOT having an active installment loan. No loan? PENALTY!
You get penalized for HAVING an installment loan whose balance is too high. PENALTY!
Some folks did some amazing research and figured out that you CONTINUE to get penalized (though not as much as if you HAD no installment loan) until you're at about 8.9% of the loan's value, at which the penalty goes away - until you pay off the loan. More than 8.9? PENALTY!
The models are all flawed. Their is no perfect way to sum up a person's ability to repay a loan in a single number..
I'm not sure there's a difference between a closed installment loan and one slightly under 100% original balance. Frankly it's nearly impossible to unconflate installment utilization with credit mix unfortunately but pretty sure they are flatly different. Short of someone opening an installment loan (without one on the report), letting it report, paying it down to some trivial percentage, and then paying it off and see if the score goes back to the prior one not sure we can really dig it out.
We'll see, installment loans don't seem to factor into new accounts and I didn't lose anything when I took out the new mortgage, probably won't lose anything with the refinance of the existing mortgage and now that I'm dragging that out I might as well refinance the auto loan too to something longer and smaller payment. Oh well, no testing for me other than stuff already pretty confident on.
