Paid Off Credit Cards- Credit Scores Drop

[IrishGirl6]

I have paid off all of my Credit Cards and my scores dropped drastically! Wayfair/ Comenity didn't help either by closing their cards.

Please help me to understand the score drop with payoff.  

[Anonymous]

There is a non use penalty when all your balances are zero. Letting a couple doallars report on your statement should move your score back up.  

[SouthJamaica]

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@IrishGirl6 wrote:

I have paid off all of my Credit Cards and my scores dropped drastically! Wayfair/ Comenity didn't help either by closing their cards.

Please help me to understand the score drop with payoff.  

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We like to call it the all zero penalty.

If all of your revolving accounts report a zero balance  you get a penalty.

If one bank or credit union card reports a small balance, the penalty goes away.

So the way to avoid it is to let one card report a small balance each month before you pay it off.

[Anonymous]

Not enough information to say really.  OP would need to list all of their cards with before/after balances/limits.  If they had a bunch of tiny balances and paid them all off, sure it could be an AZ penalty.  If OP had higher balances on those cards and just paid off significant debt, any AZ penalty would have been absorbed by the gains associated with large revolving utilization paydown.  Basically we don't know if the score drop was due to an AZ penalty until we get more info from the OP.

[Anonymous]

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@IrishGirl6 wrote:

I have paid off all of my Credit Cards and my scores dropped drastically! Wayfair/ Comenity didn't help either by closing their cards.

Please help me to understand the score drop with payoff.  

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Was there a particular reason you closed them?

Closing cards generally do not improve your credit. It does not increase the AAoA (average age of accounts) because both open and closed accounts are included in the calculation. Closing accounts do not get rid of late payment marks or anything else negative regarding the account, either. There is generally no score gains from closing your accounts and any CL you had you lost by closing them and could have increased your utilization. Since you paid off all your cards, that may not be the case for the score decrease, but did you have a balance on the card(s) when you closed them? Then that would still factor into your utilization.