Weird 5 point EXP Fico Drop

[Anonymous]

Well this is a first to me so I was curious if anyone else has had a similar experience.

I'm an AU on 3 credit cards(with my brother) and 2 of the ones that had a balance on them were paid completely off.

Basically 2 different Cap one cards.... one was $1500/10K and other was $2000/$5000.

He paid them off a week or 2 ago and this morning I see an email saying my score has changed. I'm assuming it should be another increase and

I see "balance decreased by $1500; utilization now 0% on this card, other one was balanced decreased by $2000; utilization now 0% on this card"

My fico drops 5 points to 750.  Really?

Any idea on why that would occur? I even had a balance on Feb 28th for a card that was $800/$7500 that was paid to $0 and no score change occured.

In fact, the last balance increase I had on a single card was Feb 24th with experian from a card I used for a balance transfer.  They dropped my score 4 points when that new balance hit on the card I used (which I expected)

Just sucks to lose 9 points (759 to 750) so quickly especially when I expected to gain back those other points lost sooner than later.

[Anonymous]

The FICO scoring model definitely likes to see some balance on a card. So the conventional wisdom around here seems to be to allow one card to report between 1% and 9% utilization (utilization for that card, that is, not for your total credit available). If your had zero report on all cards, that could be why you saw this small drop.

If I'm reading your post correctly (and if there aren't other balances than the ones you mention), you went from appoximately 19% utilization with balances on three cards to 0% with balances on no cards. It's not surprising that you would see a minor drop for that, although I would tend to view a 5 or 9 point move in either direction as noise rather than a cause for concern.

[Anonymous]

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@Anonymous wrote:

The FICO scoring model definitely likes to see some balance on a card. So the conventional wisdom around here seems to be to allow one card to report between 1% and 9% utilization (utilization for that card, that is, not for your total credit available). If your had zero report on all cards, that could be why you saw this small drop.

If I'm reading your post correctly (and if there aren't other balances than the ones you mention), you went from appoximately 19% utilization with balances on three cards to 0% with balances on no cards. It's not surprising that you would see a minor drop for that, although I would tend to view a 5 or 9 point move in either direction as noise rather than a cause for concern.

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Thanks for the reply!  I have 6 cards on my own and I'm AU on 3 other cards.   I have a balance on 3 of my cards right now and my total utilization across the board is 12%.  So I do have balances on my cards but just didn't know why my score dropped 5 points because of 2 of the AU cards going from around 19% down to 0.

Even if I didn't get a small score increase then it would be fine but dropping 5 seemed weird and confusing.

[Anonymous]

It would seem there is something else going on. Because you're exactly right that a decrease in balance and (perhaps even more importantly) a decrease in the number of cards with a balance, shouldn't cause your score to drop.

It's likely, though, that if you can pay off one of two of those cards that have a balance, that when they report you'll see the increase you were expecting when these other cards were paid off (that is assuming one of the zero-balance cards doesn't report a balance in the mean time). I saw that recently in my own credit report when I had allowed five cards to report a balance one month. The next month I paid off all of them but one before the statement closed. First one reported: no change in score. Second one reported: nothing.

Then the third one (I think it was the third) reported. It was only $11 that had reported the previous month, but when it reported $0 the next month, my FICO 8 jumped 15 points. It seemed kind of funny to see an $11 payment result in a 15 point increase, but it wasn't really about the $11. It was about dropping below a certain threshold for cards with balances. When it got down to two cards (it may have even been one card), I saw the increase.

[Anonymous]

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@Anonymous wrote:

It would seem there is something else going on. Because you're exactly right that a decrease in balance and (perhaps even more importantly) a decrease in the number of cards with a balance, shouldn't cause your score to drop.

It's likely, though, that if you can pay off one of two of those cards that have a balance, that when they report you'll see the increase you were expecting when these other cards were paid off (that is assuming one of the zero-balance cards doesn't report a balance in the mean time). I saw that recently in my own credit report when I had allowed five cards to report a balance one month. The next month I paid off all of them but one before the statement closed. First one reported: no change in score. Second one reported: nothing.

Then the third one (I think it was the third) reported. It was only $11 that had reported the previous month, but when it reported $0 the next month, my FICO 8 jumped 15 points. It seemed kind of funny to see an $11 payment result in a 15 point increase, but it wasn't really about the $11. It was about dropping below a certain threshold for cards with balances. When it got down to two cards (it may have even been one card), I saw the increase.

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Yea I'm not exactly sure which is why I wanted to ask to see if anyone else had anything like that happen.  I will check to see if it rebounds in a few days or so after a few others report. 

I agree with what u said about paying the others down.  I used to keep 1 card with a balance and the others $0 but have been just trying to keep my utilization overall at 15% or less.   I was at 8% overall until a purchase awhile back put me at 12%.

[Anonymous]

Something that's helpful to remember is that the utilization doesn't have a cumulative effect. In other words, keeping your utilization at a certain level doesn't build up your score over time, and letting your utilization report higher doesn't drive your score lower and lower. So when you know you're going to apply for something (or when you just want to see how high you can push your score), you can just make a point to get your utilization in line. As soon as you do that, you'll get all of the benefit you can from utilization, regardless of how high your utilization was the previous month(s).

[Anonymous]

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@Anonymous wrote:

Something that's helpful to remember is that the utilization doesn't have a cumulative effect. In other words, keeping your utilization at a certain level doesn't build up your score over time, and letting your utilization report higher doesn't drive your score lower and lower. So when you know you're going to apply for something (or when you just want to see how high you can push your score), you can just make a point to get your utilization in line. As soon as you do that, you'll get all of the benefit you can from utilization, regardless of how high your utilization was the previous month(s).

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sounds good.  thanks for replying and offering advice!