I transferred about $5K from one credit card to another. I noticed that my credit score plummeted about 30 points! At first I thought that maybe the agencies only saw one side of the transaction and not the other, but 2 months later, it's still at that low point. Why did that happen?

(I have a perfect payment record and a low credit utilization percentage. Also I did not open any new accounts or close any old ones to do this transaction)

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    Obsessing over credit score is not a productive way to spend your time. – zeta-band Jun 7 '19 at 15:44
  • Have you since paid off the balance? Or is it sitting on the second card still? – dwizum Jun 7 '19 at 15:47
  • @dwizum still sitting... I'm paying the minimum on it every month. – Bart Jun 7 '19 at 16:38
  • Bart - I edited my answer slightly to reflect your comments. Having that one card nearly maxed out is almost certainly what caused the drop, unless there's something else going on that's not mentioned here. – dwizum Jun 7 '19 at 17:22
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    @quid I wondered about that too but the OP stated that the score hasn't recovered two months later, which would have been enough time to allow the first card to get reported at the current, lower balance. – dwizum Jun 7 '19 at 17:37

In a comment, you clarified that the card you made the transfer to is maxed out. That's almost certainly the issue.

When most consumers think about utilization, they immediately think in terms of averages - if I have 4 credit cards with $2,500 limits, I have a grand total of $10,000 in credit card limit - if the sum of my 4 balances is $2,500 then I have a 25% utilization.

While that math is solid, it's not the entire story - scoring models typically also include a factor of each card's utilization. So - if you have those same 4 cards, but that $2,500 balance is on one of them and the other three have $0, you're doing to be scored differently than someone who has the $2,500 balance spread across all 4 cards.

Given that, something like a balance transfer can alter your score because it changes each card's utilization, even if it does not change your total utilization. Even if you have a good total utilization, if you have one card that's maxed out, it'll have a negative impact on your score.

Ultimately, the good news is that utilization is memoryless, only your most recently-reported utilizations are used when calculating a score. So, if or when you pay off that balance and the percentages change, your score will instantly increase. Or, if you move the balance back to the first card, the score change would instantly reverse itself. Because of this, it's not really important to be concerned over credit score changes as a result of utilization unless you're preparing to take out a new loan or otherwise do something where your score is important. Of course, you should always pay down card balances rather than incur interest, but in terms of utilization's impact on your score, as long as you "work" the utilization to be ideal in the month before needing to use your score, you'll be fine.

All that said, it's also possible that something else happened - perhaps even something fraudulent - it's wise to keep an eye on your score on a site like creditkarma or another service that allows you to view your credit report and/or explains changes to you. You've said that you didn't open or close any accounts, but there can be other reasons why your score may change. For instance, some utilities or other service providers will do a hard pull before serving you (the vendor that fills the LP tank at my home does for instance). Or, an old and closed account may have aged off your report, which could have driven average age of credit or other factors down.

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Hard to say with certainty, but I'd wager the card you transferred the balance to has a lower limit than the card you transferred from.

Credit utilization is not just one measure, both the per card utilization and total utilization factor into your score. Here's an article on The Balance that supports this notion:

The FICO scoring model looks at your credit utilization in two parts. First, it scores the credit utilization for each of your credit cards separately. Then, it calculates your overall credit utilization, that is, the total of all your credit card balances compared to your total credit limits. A high credit utilization in either category can hurt your credit score.

Credit scoring is somewhat of a black box, but this seems like the most probable explanation for your dip in score.

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  • Yes, the new card is maxed out. Should I try to get them to increase the limit, even though I have no plans to use it? – Bart Jun 7 '19 at 16:37
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    @Bart If you won't be paying it down soon and are wanting to increase your credit score in the short-term then a limit increase on that card would help. But otherwise it will just bounce back up over time as you pay it down. – Hart CO Jun 7 '19 at 16:44
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    @Bart: "The new card is maxed out" is definitely hurting your score. The bright side is that as dwizum says, this score factor has no memory. – Ben Voigt Jun 7 '19 at 16:59
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    Asking for a limit increase will give you a hard request, and it will fall even more - just stop digging. – Aganju Jun 7 '19 at 17:27
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    @Aganju I've had a number of limit increases without hard inquiries. – Hart CO Jun 7 '19 at 17:57

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