My credit utilization went down from 19% to 2%. Why did my credit score go down?

Question

According to multiple different credit score trackers, between last month and this month, the only change on my credit report was a significant decrease in my credit utilization (from 19% to 2%), because I paid off my credit card early, and a slight decrease on the amount I owe on my mortgage, as occurs every month.

As a result, my credit score dropped by 12 points. It’s not a huge deal, but I’ve never seen my score drop due to a decrease in credit utilization before, so what could have caused this? There’s literally nothing else that changed on my report, according to my bank’s report, my credit card company’s report, and a third party monitor. They all agree that that was the only change, and they all agree that my score dropped by 12 points.

Edit: I’m not worried about those 12 points right now, but rather I’m wondering if I did something wrong in cases it comes up again in the future when it’s more important.

Answer 1

Credit scores don't calculate in real-time.

It's likely that your score dropped 12 points when your utilization was reported at 19%. It hasn't been recalculated at 2% utilization, yet; if at all. You'll probably not be at 2% utilization when it's recalculated.

Yes, these credit score trackers know you're at 2% utilization but the credit bureaus haven't recalculated yet.

It's kind of a "luck of the draw" situation in that your score is affected based on what your status is at the time of calculation.

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I use Credit Karma and find that they do a fairly good job of telling me "What's changed?" when I see a score change.

Answer 2

I don't know how detailed the reports are that you get, but there are factors that can change daily that can swing your score slightly. The average age of your credit accounts is one factor that can change daily.

I have also seen anecdotal reports (most credit score algorithms are "black-box" to reduce gaming the system) that a 0% utilization on an account can hurt your score because they are assumed to be cards that are not actively used and weighted differently.

Bottom line: pay your bills on time, don't overuse your credit and you'll be fine. I wouldn't be surprised at all if you didn't get those 12 points back and more on your next report. But even if you don't, credit scores are so broadly interpreted that it very likely won't change you ability to get credit or the rates that you are offered. And if you aren't opening more credit lines, what difference does 12 points make to you?