Zero Balances

[Berkster]

Good evening everyone, I have a quick question. Today, I paid off all of my credit card debt and I was wondering what kind of impact this will have on my credit score. According to the FICO Simulator, my score will go up a few points if the balances are paid off in 24 months. I understand that it is just a simulation of "what could happen" but I was wondering how would it affect the score if the credit card debt was paid sooner than 24 months. Thanks

[OmarGB9]

Paying down your balances is always a good thing, however it is generally not wise to let your report show 0% utilization. Charge something small on one CC and let that one report the small balance.

[Anonymous]

I really have no clue how this works either but I figured I'd chime in. My scores fell about 13 points (TU) and I recently paid all but one of my 10 cards down to 0 balance. The one with a balance is 503 on a 2500 balance. I am guessing the 0 balance has affected me as well as the multiple inquiries I have had since I was mortgage shopping. My udnerstanding is that this will kind of iron itself out over the next few months. 

[NRB525]

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@Berkster wrote:

Good evening everyone, I have a quick question. Today, I paid off all of my credit card debt and I was wondering what kind of impact this will have on my credit score. According to the FICO Simulator, my score will go up a few points if the balances are paid off in 24 months. I understand that it is just a simulation of "what could happen" but I was wondering how would it affect the score if the credit card debt was paid sooner than 24 months. Thanks

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This is a good thing, getting to a point of no interest cost.

However, to +1 Omar, you do want to have some activity, some balance reporting on at least one credit card otherwise you will hurt your score. Easy enough to solve, just let one balance report. Now that all your balances are zero, all the interest rate clocks should be reset so you can pick one card to charge some groceries or your next tank of gas, or better yet, go get a nice meal and put it on a revolver, to celebrate.

[tufa4311]

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@Berkster wrote:

Good evening everyone, I have a quick question. Today, I paid off all of my credit card debt and I was wondering what kind of impact this will have on my credit score. According to the FICO Simulator, my score will go up a few points if the balances are paid off in 24 months. I understand that it is just a simulation of "what could happen" but I was wondering how would it affect the score if the credit card debt was paid sooner than 24 months. Thanks

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This is all relative. If you had one credit card with a balance reporting and you paid that down to zero, well, your score may drop. If you had 5 cards all at 90%+ UTIL and paid all in full but left a bit on one to report your score could jump 50+ points or more. The word "all" could mean next to nothing or it could mean loads...

[youdontkillmoney]

I suppose technically you do not want to show 0% utilization if you want to "optimize" your score, but I tend not to scrutinize my FICO scores in that manner and just want to ensure my bills are paid off or even if I pay more and there is a credit due me on my credit card balances. It is not unusual for me to  have a credit due me across all my credit cards in fact. My FICO scores are nonetheless tops (see signature line).

So use and pay off your debts (on time payment) , your scores will take care of themselves and you'll qualify for some of the best rates around. 

[Anonymous]

When you run the simulator there is the 24 month simulation, but right below it is the option of simulating paying off amount x - your actual balance. Run that simulation.

But honestly we get too caught up in running the rat race. Look at your scores. They are glorious. They are worthy of the highest praise and you should delight in them. Ultimately you got them by cleaning stuff up and most importantly by paying down your debt, and paying on time. The greatest thing is not having a perfect Fico score as much as being debt free with great Fico scores. You can have them both. Celebrate that and don't worry over a few points here or there.

You have great scores now and will have great score even if everything shows a big fat ZERO.  

[Thomas_Thumb]

Berkster,

Congratulations on achieving 800 + with your current Fico scores. You goal in your signature shows 750 - needs updating?