Why is my credit score going down?

[Rose Jones]

Feels pretty yucky. I took some money out of my 401 K to pay back some debts. 

I paid off almost 6,000 in a high interest credit card , The next day my credit score dropped 90 points. 

WTF?

[Rose Jones]

So are you saying I should keep putting a few purchases on that card and paying them off immediately? I always pay on time. I was hoping to get a Heloc or at least home equity loan. I will take it all in stride. 

[Rose Jones]

Quote from @Account Closed:

Quote from @Rose Jones:

So are you saying I should keep putting a few purchases on that card and paying them off immediately? I always pay on time. I was hoping to get a Heloc or at least home equity loan. I will take it all in stride. 

For best FICO results, use the card up to 1/3 of the limit (notice I did NOT say USE one third, just don't go over one third) every month. It's actually better to leave $20 to $80 on the card so it is deemed to be "active". Don’t buy unnecessary things, use it for gas, and small things.

And of course, be aware of what you do use it for. Where you use your card leaves a trail. You may not want them to know everything. It increases your junk spam.

It's convoluted thinking, I know, but I didn't make up the rules, I just analyze them. Your credit score will likely bounce back in a month or two depending on card usage.

[Rose Jones]

Thanks Roberto R - It just felt like such a slap. I think this blow puts me too low for a Heloc which is frustrating. I did buy myself some sorely needs pants from Temu on that card yesterday and I will pay it off with the next paycheck. I am not sorry that I did it however, the interest rate was like 28% and I don't want to be carrying that around for long. I now have the card where I can use it occasionally and it will add to the amount of available credit. This story probably explains something that happened when I suddenly got a credit limit reduction on my Wells Fargo card . I think I paid it off too much. OY vay. :)  

[Zach Bosson]

Quote from @Rose Jones:

Thanks Roberto R - It just felt like such a slap. I think this blow puts me too low for a Heloc which is frustrating.

Hey Rose! Sorry to hear about your score dropping. Credit seems so unfair, it's some mystery algorithm that impacts our life so significantly, oh and they can sell our data, and ++we're required to use it to operate in society!

Good news - you didn't say just how low it dropped, but we do offer HELOCs down to 640 credit score, I'd be happy to take a look. Link in my signature for a free look. (and we do a soft credit pull, so no more damage to that score :) ) 

[Ron H.]

There is ZERO need to keep a balance on a card.  This just enriches the CC companies.  My score is always about 840 and I have never left a balance on a card.  Try to have cards with high credit limits and try to keep the utilization down on them.  Then pay off in full every month.

[Bruce Woodruff]

The whole credit score thing is such a scam. I don't know all of the ins and outs, but I can tell you that twice now (in the past 10 years)  I have paid all of my debts, only to have my score drop drastically.

Last time it dropped from 740 to 620 in about a month. My banker said it was solely due to paying off everything down to $0.00. They really don't like that, it makes you a bad credit risk in their eyes.

Seems to me that it would be the opposite.....but what the F do I know?

[Kristine Ann]

Paying off a credit card balance (and keeping the card open) does not decrease your credit score.  If you pay off a balance on a credit card, your credit utilization on that card goes to 0% which is very good.  All other things being equal, your credit score will go up....next month.  It takes a month to a month and a half for companies to report and for it be reflected on your score. 

Closing the card would decrease your score. Also, paying off one card but letting the balance/credit card utilization raise to over 30% on another card would drop your score. Changing addresses, changing jobs, high DTI ratio, and high credit utilization will all decrease your score.

[Stephanie N.]

Hi Rose, I would suggest an alternative for future use that will not impact your credit. Have you heard of Bank on Yourself-type policies? It's a way to set cash aside and allow it to grow with guaranteed returns and you can borrow against it at a low interest rate at any time and it won't impact your credit score. Best part is, your money will continue to grow even while you have loaned it out to yourself. I'd be happy to tell you more and discuss if it is right for you if you are interested. I'm a Bank on Yourself professional and personally have my own policies that I use to fund my real estate investments.

[Rose Jones]

Quote from @Stephanie N.:

Hi Rose, I would suggest an alternative for future use that will not impact your credit. Have you heard of Bank on Yourself-type policies? It's a way to set cash aside and allow it to grow with guaranteed returns and you can borrow against it at a low interest rate at any time and it won't impact your credit score. Best part is, your money will continue to grow even while you have loaned it out to yourself. I'd be happy to tell you more and discuss if it is right for you if you are interested. I'm a Bank on Yourself professional and personally have my own policies that I use to fund my real estate investments.

[Rose Jones]

Thanks Stephanie. I especially will consider that as I leave my job. It is distressing to realize that as I retire I will not be eligible to use the bank to buy my next home. That is because I am going to take my pension as a lump sum and use it to fund my livelihood and investments. I know the phrase Be your Own Bank - I just haven't got there so far. 

[Bruce Woodruff]

Quote from @Kristine Ann:

Paying off a credit card balance (and keeping the card open) does not decrease your credit score. 

Closing the card would decrease your score.  

 Ahhhh, that's it then....

[Myeasha Jones]

Quote from @Stephanie N.:

Hi Rose, I would suggest an alternative for future use that will not impact your credit. Have you heard of Bank on Yourself-type policies? It's a way to set cash aside and allow it to grow with guaranteed returns and you can borrow against it at a low interest rate at any time and it won't impact your credit score. Best part is, your money will continue to grow even while you have loaned it out to yourself. I'd be happy to tell you more and discuss if it is right for you if you are interested. I'm a Bank on Yourself professional and personally have my own policies that I use to fund my real estate investments.

 I want to learn more about this, I have never heard of it

[Stephanie N.]

Quote from @Myeasha Jones:

Quote from @Stephanie N.:

Hi Rose, I would suggest an alternative for future use that will not impact your credit. Have you heard of Bank on Yourself-type policies? It's a way to set cash aside and allow it to grow with guaranteed returns and you can borrow against it at a low interest rate at any time and it won't impact your credit score. Best part is, your money will continue to grow even while you have loaned it out to yourself. I'd be happy to tell you more and discuss if it is right for you if you are interested. I'm a Bank on Yourself professional and personally have my own policies that I use to fund my real estate investments.

 I want to learn more about this, I have never heard of it

 Just sent you a PM!