Score dropped 17 points after paying off a credit card balance to 0.

[Anonymous]

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@Gladius wrote:

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No, they do it because they are the devil and have no remorse when you are literally paying hundreds of dollars over your minimum amount to decrease your debt with them.

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Hundreds of dollars over a minimum payment can still result in taking years to pay off a balance.  If you recently missed a payment on another account and they saw that change on your CR, your level of risk instantly increased substantially.  That could mean you may miss a payment with them soon, certainly long before the balance on the account is to be paid off.  Again, while it may seem cruel or whatever it really just comes down to risk assessment.

[sarge12]

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@Anonymous wrote:

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@Gladius wrote:

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No, they do it because they are the devil and have no remorse when you are literally paying hundreds of dollars over your minimum amount to decrease your debt with them.

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Hundreds of dollars over a minimum payment can still result in taking years to pay off a balance.  If you recently missed a payment on another account and they saw that change on your CR, your level of risk instantly increased substantially.  That could mean you may miss a payment with them soon, certainly long before the balance on the account is to be paid off.  Again, while it may seem cruel or whatever it really just comes down to risk assessment.

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If possible it is just best to establish a portfolio in such a manner to allow your score to suffer little damage regardless of what any single credit card issuer does as far as closures, balance chasing, CLD, etc. I know with you I am likely preaching to the choir, but maybe somebody actively building will read this and alter their plan. Part of the issue is people start earnestly re-building without a plan, and that often results in future issues when just 1 card issuer decides to reduce their risk exposure. That is what happens in an economic downturn, the issuers look at taking AA on more risky, or less profitable cardholders. Due to my always PIF I am very low risk, but also represent little profit to an issuer. In spite of high scores I am not therefore immune to the AA whims of any single issuer. Anyone who thinks themselves immune to such are setting themselves up for nasty surprises. To the issuers we only represent a potential for profit, or risk of loss, nothing more or less.

[sarge12]

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@Anonymous wrote:

From my experience AA (CLDs, card closures, balance chasing, etc) rarely comes just due to elevated utilization, even if it's sustained.  Throw a single missed payment into the mix though and all bets are off. 

I knew someone back in 2016 that had I believe 7 CCs at the time, 6 of which were at 90%-102% utilization.  They all stayed in that range for 6 months, then 12 months.  In fact, several of them today some 4 years later are still extremely high.  During that span of time this person never saw any AA at all because they never missed a payment.  Their Fico scores have hung out in the mid 600's for the most part for years. 

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Perhaps not, but during an economic downturn they often start looking to reduce their exposure to more risky or less profitable cardholders. They are always monitoring all their cardholders accounts, so when they are told to cut their credit limits in general, the cardholder who has been running high balances has also been lowering their score and raising their risk to the issuer. If they have a very diverse portfolio with limited exposure to any, a nervous issuer can't cause huge damage. Part of the reason Synchrony and Commenity are the subject of these posts, is because Chase, Amex, Capital One, etc. will not issue 10 cards to a single person. The same diversity of accounts I speak of for cardholders also applies with most issuers. That also likely increases the liklihood of AA by an issuer if you hold 10 of their cards...they represent 10x the loss risk to the issuer if the cardholder defaults on debts. I keep expecting some of my dormant card issuers to close my unused cards, but since only 1 unused card there exists, I have so far flown under the radar. Bottom line, 1 card closure is not likely to affect scores much, 10 closed cards will. A diversified credit profile will be much more likely to survive economic downturns unscathed.

[Gladius]

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@Anonymous wrote:

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@Gladius wrote:

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No, they do it because they are the devil and have no remorse when you are literally paying hundreds of dollars over your minimum amount to decrease your debt with them.

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Hundreds of dollars over a minimum payment can still result in taking years to pay off a balance.  If you recently missed a payment on another account and they saw that change on your CR, your level of risk instantly increased substantially.  That could mean you may miss a payment with them soon, certainly long before the balance on the account is to be paid off.  Again, while it may seem cruel or whatever it really just comes down to risk assessment.

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I understand what your saying, but I haven't had a missed or late payment on any CC for over 8 years.  It just really "offended" me at the time and I chalk it up to I ran my debt up with them within a short amount of time (within a few months) and I guess I got pinged as being a "risk"...smh.  Still pisses me off, but oh well.  Haven't used that card in over a year now since I paid the balance down to zero so now they will probably close it due to "non-use"....smh.  Whatever.

[Anonymous]

On the topic of AA (not sure term since new here, but guessing something like acct acceleration?);... 

I am rebuilding from near bankruptcy in 2008 and now only one late shows up from just over six years ago and am back up to around 800 scores.  Fortunately, I usually pay off the full amount before due and went from a secured $1000 account to now 7 unsecured with $89k available so very low utilization - total now $1201 total which will pay off but have ongoing charges.  

I primarily use one card for American Airlines miles (now at about 100K but can't fly to my usual Canadian trips due to COVID-19) and the rest I just charge a very small amount each month to keep active.  Hopefully, they won't balance chase me!

On the point made about cc not being profitable, even when we pay off before they earn any interest, they still get their merchant fees. So hopefully they realize they are still profitable on the account even though some of us pay off all the time so they never get their huge finance charges!

[sarge12]

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@Anonymous wrote:

On the topic of AA (not sure term since new here, but guessing something like acct acceleration?);... 

I am rebuilding from near bankruptcy in 2008 and now only one late shows up from just over six years ago and am back up to around 800 scores.  Fortunately, I usually pay off the full amount before due and went from a secured $1000 account to now 7 unsecured with $89k available so very low utilization - total now $1201 total which will pay off but have ongoing charges.  

I primarily use one card for American Airlines miles (now at about 100K but can't fly to my usual Canadian trips due to COVID-19) and the rest I just charge a very small amount each month to keep active.  Hopefully, they won't balance chase me!

On the point made about cc not being profitable, even when we pay off before they earn any interest, they still get their merchant fees. So hopefully they realize they are still profitable on the account even though some of us pay off all the time so they never get their huge finance charges!

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AA=Adverse Action...account closure, CLD( credit line decrease), and balance chasing(repeated decreases every time you pay) are forms of that. So is interest rate increases due to missed payments.

[sarge12]

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@Anonymous wrote:

On the topic of AA (not sure term since new here, but guessing something like acct acceleration?);... 

I am rebuilding from near bankruptcy in 2008 and now only one late shows up from just over six years ago and am back up to around 800 scores.  Fortunately, I usually pay off the full amount before due and went from a secured $1000 account to now 7 unsecured with $89k available so very low utilization - total now $1201 total which will pay off but have ongoing charges.  

I primarily use one card for American Airlines miles (now at about 100K but can't fly to my usual Canadian trips due to COVID-19) and the rest I just charge a very small amount each month to keep active.  Hopefully, they won't balance chase me!

On the point made about cc not being profitable, even when we pay off before they earn any interest, they still get their merchant fees. So hopefully they realize they are still profitable on the account even though some of us pay off all the time so they never get their huge finance charges!

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Higher tier cards usually just break even on strict transactors. The SUB and rewards earned eat up the profits from merchant fees on these cardholders. They often lose money on those who default and declare bankruptcy. Over 90 percent of their profits are made from responsible revolvers that pay interest, but stop racking up debt before ever getting into bad trouble. It is a falicy that the issuers make money off of every cardholder. I have cards I used only enough to get a 200 dollar SUB, and never used it again due to their lower rewards. The issuer lost money on me on those cards.

[Anonymous]

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@sarge12 wrote:

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Perhaps not, but during an economic downturn they often start looking to reduce their exposure to more risky or less profitable cardholders.

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Right, so I think the best advice for anyone would be to not create a situation of elevated risk.  Obviously that entails never missing a payment, but really any other risk event (anything that can sharply lower your score, for example) should be considered.  The percentage of people that have received AA that haven't elevated their risk relative to those that have is extremely small.  Yes there are examples such as those that aren't profitable customers as you said, but those are borderline outlier examples when you consider the similarities between the majority that have received AA.

[Anonymous]

Good points - On my primary card with American Airlines with a $30k limit,  think I do pay a $95  annual fee but still making no interest off me and having to probably pay American Airlines for all the miles I earn   All my other cards are free, but AA card since worth the $95 in all the airline miles I get just haven't been able to use many - already had to cancel trips to Toronto and Montreal this summer.   

I did use some last year paid for RT to Frankfurt Germany although fees were almost $500 even though the fare was free.  Now have about 100k miles built up,  but can't escape hot Phoenix as I usually do on 10-day trips to Canada. 

[Anonymous]

Update: I had a card report a balance, and my score went back up 17 points. Many of you were spot on with the problem, thank you