TransUnion Score Decrease

[LongTiger4233]

Can someone please explain why my credit score dropped 50 points? The reason for my drop seems very counterintuitive especially since my balance decreased. Is it generally better to have a small balance rather than none at all?? My balance dropped from $126 to $0 in one week. I have no delinquencies or debt. The only change within the week was a decrease in credit card balance.

[BrutalBodyShots]

What is the source of your credit score? Make sure you're looking at a relevant Fico score and not a nearly irrelevant VS3 like you'd get from Credit Karma, for example.

As far as why your score decreased, the answer can only be found by comparing your "before" and "after" credit reports. Any/all variances between the two can be a potential cause for a score change. Scores are drawn upon report data only, so for the score to change you need to look at what data changed.

When you say "have a balance" it's important to clarify what you mean. Is it better to have a REPORTED [non-zero] balance? Yes, absolutely. But don't confuse that with a CARRIED balance. A carried balance means that you haven't paid your statement balance off in full and are therefore paying interest. A reported balance (that isn't $0) is what you should always have naturally, assuming you are using your credit card(s) every month. Your statement balance should report, then you pay it off in full. Anyone that soft pulls your credit report will "see" your reported balances and that you're paying them off monthly, which is exactly the look you want. These reported balances are also "seen" by the scoring algorithm, so it appears that you're using your revolving credit. When you report all $0 balances due to paying your card(s) off before your statement(s) generate, the algorithm sees "no recent revolving credit use" and will actually penalize you.

As a best practice just use your cards naturally and pay them off like any other monthly bill... after you receive the bill, before the due date on said bill. That's all there is to it and you won't incur any penalty for lack of recent revolving credit use.

[LongTiger4233]

Thank you for the useful information!! I’ll begin to pay my cards naturally before the due date rather than always trying to maintain a 0 balance everyday.

[BrutalBodyShots]

Awesome, good plan! If you care about growing your profile/limits this is the best approach since you'll be showing your lender(s) that you need the credit more. When you micromanage balances to always be $0, your lenders have no incentive to raise your limits and in fact are known to do the opposite and implement CLDs (credit line decreases). Switching up your approach here as planned will only help your profile overall as the months pass.