Pay off debt, FICO Score Drops and other things.

[Insoc]

**UPDATED/CORRECTED INFO**

So I paid off a balance on my one of my three credit cards, around $400 to bring it to $0.

I have the monthly FICO monitoring system with 3 scores, I get an alert  that my scores dropped 7 points with Equifax, there are three alerts  tied to Equifax only at the moment.

Why is this?  I thought having lower utilization = better scores?

[newhis]

You need at least 1 card reporting a small balance and others $0 to get most points for your profile.

If your only card report $0, you lose points.

[SouthJamaica]

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@Insoc wrote:

So I paid off a balance on my one CC, aroundr $400, Fico reports an alert that my scores dropped 7 points at all three bureaus.  Why is this?  I thought having low utilization = better scores?

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I don't know how it works when you have just one credit card.  But in my view, even if you did definitely lose 7 points because you reported a zero balance, it's worth it to have a zero balance 7 points is not that big a deal.

You could experiment. Let it report $50 one month, and zero another month, and see which one gets you the best score.

[Anonymous]

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@newhis wrote:

You need at least 1 card reporting a small balance and others $0 to get most points for your profile.

If your only card report $0, you lose points.

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^ This.

You can solve the problem by adding one or two credit cards, as you find ones you really like.  Then you will be able to have two cards reporting $0 (which FICO will like) and at least one card reporting a small positive balance (which FICO will also like). 

In the meantime, you will be fine if you keep your balance reporting a small number.  You can do that by paying your card down to $5 maybe a week before your statement prints.  You'll want to have a total utilization in the region of 1-8% for maximum scoring points.

[Insoc]

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@newhis wrote:

You need at least 1 card reporting a small balance and others $0 to get most points for your profile.

If your only card report $0, you lose points.

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That's the problem I have two other CC's that have a balance, one is over $2K, the other $500.  

I have the Fico Monthly Monitoring service and it gave me the alert, all three drops are related to my Merrick Bank CC which is the one I paid off.  

[Insoc]

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@SouthJamaica wrote:

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@Insoc wrote:

So I paid off a balance on my one CC, aroundr $400, Fico reports an alert that my scores dropped 7 points at all three bureaus.  Why is this?  I thought having low utilization = better scores?

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I don't know how it works when you have just one credit card.  But in my view, even if you did definitely lose 7 points because you reported a zero balance, it's worth it to have a zero balance 7 points is not that big a deal.

You could experiment. Let it report $50 one month, and zero another month, and see which one gets you the best score.

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I don't have one credit card, I have 3 cards total right now, the other two have balances.  Not 0% UTI

[Insoc]

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@Anonymous wrote:

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@newhis wrote:

You need at least 1 card reporting a small balance and others $0 to get most points for your profile.

If your only card report $0, you lose points.

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^ This.

You can solve the problem by adding one or two credit cards, as you find ones you really like.  Then you will be able to have two cards reporting $0 (which FICO will like) and at least one card reporting a small positive balance (which FICO will also like). 

In the meantime, you will be fine if you keep your balance reporting a small number.  You can do that by paying your card down to $5 maybe a week before your statement prints.  You'll want to have a total utilization in the region of 1-8% for maximum scoring points.

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I want to add another card, but I'm trying to bring up my score to make sure I'm going to qualify. 

Like stated, I have a total of three credit cards, the other two have balances so I'm not seeing 0% UTI

[newhis]

So if you have other cards with balance then that's not the problem.

Maybe paying your card triggered an alert, but the drop is not related to that.

[Anonymous]

Hey Insoc.  In case you are baffled by why everybody assumed you had one credit card, it's because you used the phrase "my one CC" in your original post.  Thanks for following back up and clarifying that you had three.

Newhis is right.  The act of paying off that particular card caused whatever credit monitoring system (CMS) that you use to send you an alert, notifying you that your balance had changed on that card.  The alert also made your CMS pull your credit score again, which apparently had gone down.

But whatever made your score go down in the last several days had already happened before the CC balance was paid off -- it's just that whatever that was wasn't an alertable event.

You mention that you want to raise up your score so that you can get a fourth card.  The best way to do that is to pay off another card and pay the remaining card down as much as you can (but leave a positive balance on it).  This might take you a while, but if so that's ok.  Just keep working at it.  The goal for any person should be to owe the CC companies no money of any kind (aside from whatever you charge that month).

[Insoc]

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@newhis wrote:

So if you have other cards with balance then that's not the problem.

Maybe paying your card triggered an alert, but the drop is not related to that.

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Everything on the alert ties to the balance going to 0, that is what Fico is showing Merrick Bank Balance to $0.