Credit Score

Why Did My Credit Score Drop After I Paid Off My Balance?

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We recently received the following question from a reader about why her credit score would drop after paying off a credit card balance:

A month or so ago I got my credit score. It was 812. Today I received an email saying there was an update to my score so I logged in to see the change. My score is now 800. The only thing different is I paid off one of my credit card balances. Should I keep a balance? This doesn’t make sense why it would go down. Nothing else has changed.

As lenders report updates to the credit reporting agencies and your credit report changes, it’s not uncommon for credit scores to fluctuate a few points from month to month. And for high scorers like yourself, a fluctuation of 12 points is very minor. However, to answer your question — paying off a credit card balance wouldn’t lower your credit score unless you closed the credit card when you paid it off. In fact, paying off (or paying down) a credit card balance would have the opposite effect.

There are a number of reasons why a credit score would drop: a negative item that wasn’t reported in the past, higher balances on credit cards, new account openings, new inquiries — or a combination of these things. It’s easy to speculate what may have caused a score drop but in the end, the only way to truly know what caused a score to drop is to compare the credit reports used to generate the score for each.

I know you mention that nothing else changed but if your score dropped, something in your credit report changed. The free monthly updates from’s Credit Report Card only include changes in your score so unless you ordered a full credit report, it’s impossible to know what caused the 12-point drop. (You can get your credit reports for free once each year from each of the three credit reporting agencies.) Having said this, there are a few other factors at work here that I think may ease your mind and explain the slight drop.

Paying a credit card balance in full doesn’t necessarily mean your credit score will reflect your most recent credit card payment. This is because credit card issuers generally report updates to the credit reporting agencies once every 30 days, typically around the time that your monthly statement drops. For this reason, the balance reported in your credit report would show the balance from your most recent credit card statement. And if your most recent statement balance was higher than the previous month’s statement balance (when your score was 812), it would cause your score to drop. So you’d have to stop using your credit card for at least a month before the balance would be updated and reflect a $0 balance in your credit reports.

In the grand scheme of things, a slight fluctuation isn’t something to be overly concerned with — especially with scores as high as yours. Scores in the 800+ range are golden in the financial world and will get you the best deals that lenders have to offer, which, after all, is one of the best reasons for maintaining great credit.

For more about credit reports, credit card management and improving your credit scores, check out these great resources:

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  • Credit Experts

    If you can keep the accounts open, the zero balances will def. help your revolving utilization. It’s also a good idea to use the cards for small purchases every now and then (and then pay the balance in full) just to keep the cards active so that your issuer doesn’t close them due to inactivity. If you want to close the cards, how it will impact your credit scores will really depend on several factors but the largest variable is how it will impact your revolving utilization. For a more detailed look at whether or not it’s a good idea to keep a credit card account open with a zero balance, the following article will help: I Have Too Many Credit Cards. What Do I Do?

  • Katydid

    Does it help our credit score to pay off our credit card balance before the statement drops, or should we wait until the statement drops to pay off the balance? We have no other debt, and we are using the card just to have an active credit score in order to purchase a house later.

    • Credit Experts

      Katydid – The goal is to keep the balance as low as possible so that your revolving utilization percentage is low (which is good for your credit scores). Having said this, the balance reported in your credit reports is typically the balance that’s listed on your monthly statement. (Creditors typically report once a month, usually around the time your monthly statement drops.) If you want the balance to be reported as “zero”, you’d pay the balance just before the credit card issuer sends their update to the credit reporting agencies. If this is a big concern, and you want to know for sure, you may wish to contact the credit card issuer to find out when they report your monthly updates to the bureau so that you can time your monthly payments accordingly.

      If your balances are low (10% or less of the credit limit), I wouldn’t really worry about this too much. As long as the reported balance is under 10%, you’ll do very well in this category of the score calculation. For more on revolving utilization, how it’s calculated and what credit score models are looking for, the following resources should help:

      The Ultimate Guide to Credit Scores
      5 Things That Make Up Your Credit Score
      How to Calculate Your Credit Card Utilization (I Have Too Many Credit Cards, What Do I Do?

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  • Credit Experts

    Scores fluctuate — often changing daily or more often. Small point changes, like the one you describe, shouldn’t be anything to worry about. We wrote about it here: Making Sense of Your Credit Score. It sounds as if you are checking your scores regularly — that’s a good habit to be in, but there’s no reason to worry about small fluctuations. Here’s how to monitor your credit score for free.

  • Gerri Detweiler

    Casey – it depends on what factors are hurting your score right now. If you get your free credit score from you will also get an action plan for your credit and a breakdown of the factors affecting your scores.

  • Gerri Detweiler

    That doesn’t necessarily mean that’s why the score dropped. There are so many factors that go into the score that may seem like the explanation though it could be something else.

  • Credit Experts

    Rob —
    So many things affect your credit score, and small changes are normal. (Often utilities are not even reported to credit bureaus, except if they end up in collections.) The best thing you can do is to pay your bills on time. We would suggest getting a secured credit card. In that case, you put down a balance equal to what will be your credit limit. Then, you’ll want to both use the card and keep your balance below 30% (below 10% is even better). If, say, you get a secured card with a $250 deposit, you’ll want to keep balances below $75. Paying the card off in full and on time should help. These resources may also help:
    How to Rebuild Credit
    How Secured Cards Help Build Credit

  • Mel

    I recently sold my home and paid off my mortgage loan in May of 2014. I also paid another loan in full in July of 2014. My credit score was 760 before May 2014 and now has dropped to 689. Who can I write to appeal this?

    • Gerri Detweiler

      Paying off a mortgage shouldn’t typically cause a large drop in your credit scores. Are you monitoring your scores through the same service each time? What reasons are being given for your current scores? Do you have other open, active credit accounts?

  • Gerri Detweiler


    I completely understand your frustration and am not in any way trying to diminish that, but I would caution you to be careful about drawing specific conclusions from a single event like this. I don’t know what your scores are, but assuming they are already strong, a 17 point drop may not mean that much in the scheme of things. I know it feels like a lot, but 17 points is only about 2.5% of 650 – the range of points in most FICO scores. And there are so many factors that go into the score, not to mention the various scorecards within a scoring model, that it can be hard to pinpoint the specific cause of a relatively small drop — especially if it’s not due to new negative information. I’d encourage you to hang in there for a month and see what happens next month.

  • Gerri Detweiler

    @Mike – Ah I see. What was your score before or after the drop?

  • Nasafiyel Paige

    I’m in the same boat here. My Experian score dropped from 710 to 690 within a week. I called the F*CO folks for an explanation as I knew NOTHING changed but a balance decrease from $90.00 to $0.00. The gentleman told me the only possible thing he could think of was having a 1% balance being reported was better than 0%. I told him there was NO WAY in Gods green earth hat would cause a 20 point drop. No way!!

  • Liz

    I have twice paid thousands of dollars at one time to pay off my cards, This time I paid 30K. Both times I did that, my credit rating dropped over 40 points, This time was the same. I paid off the debt to start looking for a house. Now that dream is dead as well as my bank account. So angry.

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