Paid off $3000 on Credit card (Score drops?)

[Anonymous]

I understand scores fluctuate and have a pretty strong understanding of why scores would go up vs. down. I am baffled by the drops I have seen in the last 2 weeks.

Equifax and TransUnion dropped by ~10 points upon news that I paid off $3000 on my only credit card to a 0 balance (3% utilization --> 0%). This is a positive action which shouldn't drop the score. The FICO simulator also shows that this payoff should result in a increase. So why would my score drop 10 points (this was the only change listed)

Any insight would be great!

[Anonymous]

Experian just dropped 20 points today on a report that my credit limit went up by $5000.

I did not request this limit increase, nor did my balance (currenlty at $0) change. So why would my score drop in this situation?

[Anonymous]

The same thing happened to me last week.  I paid off three credit cards that had a combined balance of about $2500.  The first payoff to be reflected on my credit reports is a Barclay Card Visa, which went from a balance of $642 to zero.  I got a myFico alert on 7/7/16 that "the balance on one of your accounts has decreased by $642."  The result?  A 10-point drop in my Experian score.  The next day I got the same alert with a 1-point drop in my Equifax score.  The balance decrease isn't reflected in my TransUnion report yet.  I'm hoping my scores won't drop further when the other two credit card payoffs are reported.

[Anonymous]

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@Anonymous wrote:

I understand scores fluctuate and have a pretty strong understanding of why scores would go up vs. down. I am baffled by the drops I have seen in the last 2 weeks.

Equifax and TransUnion dropped by ~10 points upon news that I paid off $3000 on my only credit card to a 0 balance (3% utilization --> 0%). This is a positive action which shouldn't drop the score. The FICO simulator also shows that this payoff should result in a increase. So why would my score drop 10 points (this was the only change listed)

Any insight would be great!

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Your score dropped since that was your only card and you went to zero usage.

[Anonymous]

Thanks for the response.  I do have other cards but do not use them.  This particular card that I paid off, does have regular use on it so why would FICO punish someone for paying off their card

[RonM21]

It likely did not drop due to an increase. What probably happened is something else on your report caused a score drop and it was triggered by the update. I'd check your info closely to see what may have changed. But the CLI was not the cause of this.

Also, if you are not seeing this with a Fico score, and it's Credit Karma, or some other form of score, the number could be out of whack naturally. Their scores are not Fico's and react differently and sometimes strangely. Make sure it is a Fico Score first.

[RonM21]

OP, you have 2 of the same thread going on. Here is the response I posted on the other one below. But it looks like the answer may have been partially figured out on this thread.

It likely did not drop due to an increase. What probably happened is something else on your report caused a score drop and it was triggered by the update. I'd check your info closely to see what may have changed. But the CLI was not the cause of this.

[Anonymous]

Your score should never drop from a cli.  It should go up a few points.  Mine did just that when some banks gave me an auto cli.  Give it a couple of days for the dust to settle and check everything again.  Don't forget to check the reason's why. 

[Anonymous]

Your scores should not drop from paying down debt.  They should go up.  Lower ut = higher fico's.  Give it a couple of days and check it again and the factors that caused your scores to drop.  3k over all of your tcl's should be a significant impact and raise your fico's.

[Anonymous]

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@Anonymous wrote:

...so why would FICO punish someone for paying off their card

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You're not getting punished, you are simply showing that you aren't using your revolving accounts credit at this moment.  If you report a small balance on one of your credit cards you'll get your 10 points back.  Zero balances across the board may appear to be the best "look" but really it isn't as you aren't "using" your credit.

Just one of the many FICO things that on the surface doesn't appear to make sense but actually does... and has a very simple work around to overcome it.