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I check my credit score on Credit Karma every week just to make sure everything is ok. Every now and then the score goes up a point, sometimes based on utilization it goes down a point or so.

However, today I open it up and my score has dropped by 20 points! From 753 to 733 in a week. The "changes" section says it is because my balance went up on a credit card, to nearly 50% utilization, but I wouldn't think that is worth 20 points. Especially when it's only ~8% total credit card utilization.

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Why would this change be so dramatic so quickly? I already paid the card off (as I do every month) should the score return to normal or will I have to fight for those 20 points one at a time again?

Edit: Roughly a month later (via CreditKarma) my score jumped the full 20 points back all at once. So it appears it was indeed a temporary jump.

DasBeasto
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    Please update this question with what happened to your score once the paid off card reports again. These "small change" experiments are extremely valuable to understanding the overall algorithm. – TTT Dec 22 '16 at 18:00
  • @TTT Will do! I did however just pay off a a large portion of a student loan so that may have some affect as well? But I'll update with numbers anyway. – DasBeasto Dec 22 '16 at 18:55
  • is checking a score the same as pulling a credit report? I thought I heard somewhere that frequent pulls of a credit report lowers the score. – coburne Dec 22 '16 at 20:33
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    @coburne that's only hard pulls from places like loan applications or credit card applications. Soft pulls like this don't affect credit. – DasBeasto Dec 22 '16 at 20:34
  • Related: http://money.stackexchange.com/questions/73084/if-i-increase-my-credit-limit-will-my-credit-score-go-up – David says Reinstate Monica Dec 23 '16 at 03:27
  • My husband's score jumped up 50 points when he took out a small student loan, even though he already had several. Mine sometimes goes down if my credit card balance happens to go down when it's reported (I pay it off every month). It's not worth stressing over. Pay your bills, don't close accounts if you can help it, and don't rack up debt you can't afford to pay. The rest will work itself out in the long run. – Kat Dec 23 '16 at 19:33

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The change was so dramatic because you went above 50% utilization on a single card, which has a negative impact even if your total utilization isn't that high. It's one of the fun nuances of FICO.

Don't worry about it. The next time that card reports out, the balance will show lower and your score will bounce back up. You need to remember that although CreditKarma refreshes its data every 7 days, that doesn't mean the individual banks have updated the data they release to the credit bureaus.

I'd also discourage you from worrying about your credit score so much. I applaud you keeping an eye on your credit reports to make sure nothing suspicious is going on, but the score itself will fluctuate frequently. Note that I emphasize the difference in score vs report. You really should only worry about your score if you're getting ready to apply for a loan or line of credit. It may be an easy way to see big jumps and use that as an indicator for events happening, but I tend to see people obsessing over their scores unnecessarily.

You're doing well, so far. Keep paying your bills on time and your score will continue to increase. Your age of credit history is your biggest detractor at the moment (based on the info you've provided). As that history gets longer, your score will increase. At this stage of your credit history, there will be larger fluctuations because you're still seen as a bit higher of a risk as a "newbie". Keep up the good work!

Additional information from www.creditcards.com :

Credit utilization -- the comparison of debt to credit limit -- is a key factor in the calculation of your credit score. According to experts, to maintain a good credit score, debt levels should not exceed 30 percent of your available credit. That's because the closer you get to your credit limit, the more likely you are to have trouble repaying your debt. To more accurately gauge your risk of nonpayment, the widely used FICO scoring model not only looks at overall debt in comparison to total credit limits, "the scoring formula also looks at utilization on the individual cards that make up the overall utilization percentage," says Barry Paperno, consumer operations manager at myFICO.com. Therefore, in order to improve your credit score, it's particularly important to keep relative debt levels as low as possible. This is especially true when you're on the verge of refinancing a home or making some other big financial move.

Spread the debt around: While your existing debt may all be on one card to take advantage of a low interest rate or great rewards, it is still worth considering spreading the debt across several cards. Using balance transfers, you can keep low balances on a handful of cards rather than a high balance on one card, which should help your credit score. Additionally, should any of your banks decide to close one of your accounts or reduce a line of credit, your utilization ratio will be better protected.

BobbyScon
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  • I wonder, though, why my own score is ~70-80 points higher that the OP's, despite having around 80% utilization on a couple of cards - the ones with 0% interest for 18 months or so :-) – jamesqf Dec 22 '16 at 18:52
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    @jamesqf I'd wager some other factor like age of accounts or number of accounts recently opened. Within the last year or so I have opened a car loan and started two credit cards (as well as applied for a different) so all of that brought my score down pretty sharply. – DasBeasto Dec 22 '16 at 19:39
  • @BobbyScon is 2.5 years of credit card use considered "newbie" as well, in terms of risk? – Honinbo Shusaku Dec 22 '16 at 20:54
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    @Abdul - Yes. OP is at just about 2.5 years for credit history. Note that the age of credit history is average age of lines of credit, not necessarily how long you've had a single CC. 9+ years for average age of credit is the top tier. 2-4 years is second from the bottom tier (i.e. higher risk). – BobbyScon Dec 22 '16 at 21:34
  • @DasBeasto: That makes sense, as I have a couple of accounts that are 20+ years old, and others starting 5-6 years ago. (Or whenever it was that the credit card companies started offering money and/or long 0% interest periods to sign up.) – jamesqf Dec 23 '16 at 06:21
  • IMO it's not worth trying to spread charges between multiple cards if you're paying it off every month (which you should!). Utilization history doesn't matter, so you can always "fix" it before applying for credit. Asking for a limit raise can help, too. – Kat Dec 23 '16 at 19:39