Pay card to $0, lose 20 points. How is this possible??

[js400021]

Hello all. I have credit monitoring through Myfico and am in the process of rebuilding my credit. Yesterday, there was an update that my citicard with a $200 balance was paid to $0 from a high balance of $66. I use this card sparingly and pay it off every month. This was reported on myfico as the following along with a score Decrease of 20 points!. This is so upsetting. It goes against everything that is being said about improving ones score. Does anyone have any insight as to why this would happen?  

UTILIZATION:  33% to 0%

BALANCE AMNT: $66 to $0

[js400021]

Sorry, I meant to say with a $200 limit, not balance. 

[AllZero]

@js400021   That's part of the FICO scoring algorithm. You were penalized for going all zero. You want to report credit usage. Have a $5-$10 statement report. For optimized scoring; aggregate utilization 8.9% or below, individual utilization 28.9% or below. See AZEO.

[js400021]

I see, thank you.  I assume this is for revolving credit only? I have a personal loan and a school loan with a balance still. 

[Nomad3]

Im assuming you only have the one credit card? If so the penalize you for _not_ using credit. If you have only one card make it reports a balance, anything under 8% will give you the most points. If you have multiple cards at least one of them needs to report a balance.

[AllZero]

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@js400021 wrote:

I see, thank you.  I assume this is for revolving credit only? I have a personal loan and a school loan with a balance still. 

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Yes, that is the revolving account, credit card.

Installment loan utilization is another scoring factor too.

[Anonymous]

Great advice, definitely the all zero penalty, always report a small balance.

[expatCanuck]

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@js400021 - To be clear -- always have at least one credit card report a balance.  Any other cards can safely report zero.

[Anonymous]

I'm in the same boat. Just paid both my cards to zero and lost 16 points. The only other change on my report is my CL went from $900 to $3800.

I should have known better...From now on I will make sure to always carry a small balance.

[Anonymous]

Hi there, 

Another rule of thumb to consider is .. your less likely to be granted a CLI if you routinely show a 0 balance on your card. The Card issuers system will alway register your account as having no usage therefore you will likely be denied a CLI. I learned the hard way doing exactly what you did.