Credit card balances can bounce your scores around every month. Max out your card and your scores plummet, pay off your cards and scores jump. This is due to “credit utilization” on your revolving credit accounts (credit cards). In the FICO scoring model, your utilization is reflected in 30% of your credit rating. This is the 2nd largest factor to your credit rating, only behind payment history which is 35% of your rating.
There are online “what if ” simulators I’ve worked with over the years, and I’ve run numerous scenarios on credit utilization and your credit scores. I’ve run simulation on paying off credit cards, paying down to 30% of limits, and down to 10% of limits. On all the simulators I’ve found, the most points for your credit scores isn’t to pay off your credit cards, but to have them at a 10% balance of the credit limit.
So the next time you’re trying to raise your credit scores for a mortgage or auto loan, pay down your credit cards to 10% of the credit limit. You’ll have to wait until your next statement is generated for the balance to report to the credit bureaus to help your scores. Or you can “Rapid Rescore” those balances to update in a week. A Rapid Rescore is an unscheduled update your credit accounts.