Score drops paying off balances?

[Anonymous]

Hey all!

I pay off generally all but one balance to full each month.

Today I had an update on my Transunion of my $14 -> 0 and my score dropped 6 pts! My overall utilization for everything is under 10% only one card has a balance on it that is reporting still.

Why does your score take a hit for paying things off? Should I leave everything with 'some' balance to optimize this?

I know it was only 700->694 but when you are trying to rebuild everything taking a hit for good behavior is just annoying.

Thanks all!

James

[2GreenThumbs]

I'm kind of in the same boat.  I've had two mortgages on my credit reports- an old mortgage with B of A and a new refinance with my CU.  B of A hadn't updated my payment or loan information since October 2018.  I called and requested that they update as "Paid in full" since I refinanced in March.  They did and my TU took a 17-point hit!  Nothing happened when EQ updated.  My mortgage never reported to EX, so all good there, but man, that 17-point decrease was annoying.  I would have thought that it would be preferable to have a lower DTI.  

[Anonymous]

Ya it makes no sense...

I have set up now to start nuking down some student loans but who knows maybe my score will start going backwards. They really should demystify the whole credit process and set people up for success. i.e. if you pay stuff off scores go up, if you don't they go down. Right now its you dont pay they go down, you pay...they might still go down lol

[SouthJamaica]

---

@Anonymous wrote:

Hey all!

I pay off generally all but one balance to full each month.

Today I had an update on my Transunion of my $14 -> 0 and my score dropped 6 pts! My overall utilization for everything is under 10% only one card has a balance on it that is reporting still.

Why does your score take a hit for paying things off? Should I leave everything with 'some' balance to optimize this?

I know it was only 700->694 but when you are trying to rebuild everything taking a hit for good behavior is just annoying.

Thanks all!

James

---

I don't understand your post.

You say "Today I had an update on my Transunion of my $14 -> 0" What does that mean? Update of what? And on what Transunion?

Then you say "My overall utilization for everything is under 10% only one card has a balance on it that is reporting still". What does that mean? Is your overall utilization under 10%? Is it all one only one card? If so what is the utilization on that card?

Then you say "Why does your score take a hit for paying things off?" Actually it doesn't. Your score doesn't usually take a  hit for paying things off. And what score are you talking about? And what "things" are you talking about? In FICO scores the only time one takes a hit for paying off a revolving account is when all the other revolving accounts are reporting zero balance as well.

And then you ask "Should I leave everything with 'some' balance to optimize this?" The answer to that is no. It's better to have mostly zero balances.

So I hope you will clarify what you are talking about.

[Anonymous]

Yes as SJ said the only time you take a ding for paying off a revolving balance is if you go to all zero. Meaning if you pay off every balance.

It is similar for installment loans but a little different. With installment loans the sweet spot is under 8.9% that’s where you achieve and realize the most points, that’s in the aggregate mind you. Now with that said when it goes all zero you also suffer a penalty, that’s why when you pay off your only loan you take a ding. We’ve theorized about the reasons for the penalties when you do not carry revolving balances. I’ll try to find the link to the post for you.

2GreenThumbs i’ll bet you the credit union refinance is on Equifax and that’s why you didn’t take a hit there am I right that the credit union refinance does not report to TU but it does to Equifax? And is that your only installment loan? If so it makes sense.