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Paid off one car loan early, took out another... score dropped 21 points!

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mynamemightbetim
Established Member

Paid off one car loan early, took out another... score dropped 21 points!

I'm so upset, I felt like I was making so much headway in my credit score, and just got set back to last year! UGH.

 

1) I had a $15,000 5 year loan on my truck with a cosigner, I sold it and paid off the loan after exactly three years. 

 

2) Took out a new truck loan for 5 years, $33,000 that same week for a new truck. 

 

Nothing else has changed on my reports, but my EQ score has dropped 21 points. Does this normally happen? 

 

I don't have much else in my credit mix, other than one installment loan from my consolidated student loans. I closed a credit card two years ago before learning about the mystical, all-too-important "credit score" haha. How long will it take me to recover from this? 

 

Thanks!

Message 1 of 10
9 REPLIES 9
IamB2
Established Contributor

Re: Paid off one car loan early, took out another... score dropped 21 points!


@mynamemightbetim wrote:

I'm so upset, I felt like I was making so much headway in my credit score, and just got set back to last year! UGH.

 

1) I had a $15,000 5 year loan on my truck with a cosigner, I sold it and paid off the loan after exactly three years. 

 

2) Took out a new truck loan for 5 years, $33,000 that same week for a new truck. 

 

Nothing else has changed on my reports, but my EQ score has dropped 21 points. Does this normally happen? 

 

I don't have much else in my credit mix, other than one installment loan from my consolidated student loans. I closed a credit card two years ago before learning about the mystical, all-too-important "credit score" haha. How long will it take me to recover from this? 

 

Thanks!


Hello and welcome to the forum.

 

Looks like the only explanation I have (without knowing the full credit profile picture) is that the loan you had was far smaller than the one you have now. If your original loan was $15,000 over a 5 year period, in 3 years, you would have paid off a big portion of it. Say 60% leaving you with a balance of roughly $6000.00 (assuming you had paid 60% over the 3 years you were paying the loan). $33,000 is a far different figure. Debt to Income may be a lot higher than it was with the previous loan.

 

Hope that helps.

FICO® EQ 717 (3/5/15); TU08 732 (3/5/15); EX: 723 (3/5/15) - Last app 3/15/15; Inquiries: A TON!

CITI ThankYou Preferred - CL: $2,000




Starting Scores: 590s on 12/2013. Hover over card image to view details! *After Amex approvals - [I was supposed to be] Gardening!*
Message 2 of 10
mynamemightbetim
Established Member

Re: Paid off one car loan early, took out another... score dropped 21 points!

I was hoping to apply for an FHA (or USDA if my scores improve enough) mortgage by the end of the year (after a collection falls off this July, and my student loan lates will be almost two years old) but now I'm really shaken about my scores! Thanks for your response. When the auto lender pulled my scores they were much higher than the fico ones I got. (one was 626 and two were 615, so that is noteably higher than the 59x that I pulled before going to the dealer anyway, so maybe the damage isn't as bad as what I am seeing) @iamb2, how'd you improve your credit scores so much, so quickly? 

Message 3 of 10
IamB2
Established Contributor

Re: Paid off one car loan early, took out another... score dropped 21 points!


@mynamemightbetim wrote:

@I was hoping to apply for an FHA (or USDA if my scores improve enough) mortgage by the end of the year (after a collection falls off this July, and my student loan lates will be almost two years old) but now I'm really shaken about my scores! Thanks for your response. When the auto lender pulled my scores they were much higher than the fico ones I got. (one was 626 and two were 615, so that is noteably higher than the 59x that I pulled before going to the dealer anyway, so maybe the damage isn't as bad as what I am seeing) @IamB2, how'd you improve your credit scores so much, so quickly? 


It could also be that the dealership was pulling the Auto Enhanced version of the FICO.

 

With my score history, I was blessed as majority of the baddies were coming up on the 7 year mark. Some dropped in March of this year, others I negotiated, very convincingly I may add, a PFD (and not even for a full balance - i think it was like 40% of what was owed). So currently, I only have one baddie left (last update on March of 2012). In the meantime I have been actively getting cards in what seems like every month. in October of last year i had no revolvers, when I got approved for a capital one secured card. Then came CreditOne, then Fingerhut and Amazon. Denied Walmart. Took a little bit of a break and then was added to my Dad's Capital One card (perfect 2.5 years of payment history) which I inherited on my report.

 

I got a new car loan (mostly to offset the charge off - a reposession) that still remains on my report (my only baddie left) on March 9th. Apped for Discover after receiving a mail offer, and was declined. In April I got the Barclays Rewards, and I was stoked. Finally, one night last week, I was drunk, and I checked the pre-approval links and Chase had both freedom and slate, so I applied for Freedom. Then I got brave, and applied for Amex (twice - two different cards).

 

There IS light at the end of the tunnel. Just that sometimes it takes longer than we want, but we can prevail.

FICO® EQ 717 (3/5/15); TU08 732 (3/5/15); EX: 723 (3/5/15) - Last app 3/15/15; Inquiries: A TON!

CITI ThankYou Preferred - CL: $2,000




Starting Scores: 590s on 12/2013. Hover over card image to view details! *After Amex approvals - [I was supposed to be] Gardening!*
Message 4 of 10
mynamemightbetim
Established Member

Re: Paid off one car loan early, took out another... score dropped 21 points!

When I had asked the lender about pulling an auto-enhanced score, since all of my previous car loans had perfect payment history he said "pfffttt we don't use those". And I got a pretty darn good interest rate.. Esp when I look at other's who have posted their auto loan rates with credit that looks like mine. 

 

The baddies on my score are 9 student loan lates on two loans (so, 18 60-120 day lates) with the same servicer that I thought were in deferment while I was away from home, but they are with AES and going no where. They are now over a year old now, and a collection that I PFD'd last month that should come off soon) and the fact that I have no revolving credit. But, I also sent out a goodwill letter last year for a different collection that worked. But damn, I have been so worried about getting a new car loan and eventually a mortgage that I really have not wanted to apply for any new credit for fear that it'll kill my DTI. Maybe, I'll just rent for another year haha. Smiley Indifferent

Message 5 of 10
mynamemightbetim
Established Member

Re: Paid off one car loan early, took out another... score dropped 21 points!

Welllll, I just tried the "shopping cart trick" with no luck for myself. My fiance just got a VS card though (haha) and I applied and got approved for a cap 1 secured card. Kicking myself for not doing this last year. Her credit has already been hovering around 700 for a long time, only problem is she just graduated college and I am the steady income for a few years now guy. Good credit, no money, bad credit, and good money haha. Going to see where this takes us. I'm sure at least having revolving credit on file will help (myFICO's credit helper thing keeps recommending I get a card, and it's not like I have anything to lose), and the HP, well. I'll live with that. Thanks for your encouragement. Smiley Happy

Message 6 of 10
RCFL
Frequent Contributor

Re: Paid off one car loan early, took out another... score dropped 21 points!

Sometimes I really don't know how those fico score algrorithm works. I recently add a 25k car loan to my profile and bamm... my scores dropped like 40 points but then it bounced back (like 30+) a few days later. 

Message 7 of 10
notfancy
Valued Contributor

Re: Paid off one car loan early, took out another... score dropped 21 points!

If you're looking to buy a home soon, I'd suggest that maybe you should not apply for any more credit.

 

Also, your score might not have gone down. If you were using this site for your EQ scores, they recently changed what model of scores they are using. They went from 04 to 08. The EQ 08 version uses a different formula to determine scores.

 

If you haven't already, would you consider posting in the Rebuilding your Credit subforum what is on your report? Perhaps the kind folks in that section can help you determine what you need to do, and how you need to do it in order to get you mortgage ready?

625 EQ FICO Current Score: 660 DCU EQ FICO/ 645 Scorewatch EQ FICO , EX FICO 664, TU FICO 737 (08/2014)
Goal Score: 700   Seedling again as of 07/29/14
Message 8 of 10
mynamemightbetim
Established Member

Re: Paid off one car loan early, took out another... score dropped 21 points!

So I figured out the drop! Paying off a dang collection! It was agreed as a PFD with the OC, so hopefully it gets removed soon. But I noticed that it was updated to PIF which is NOT what I had agreed to. If I wanted to do that, I would have left the silly thing!

Message 9 of 10
Anonymous
Not applicable

Re: Paid off one car loan early, took out another... score dropped 21 points!

Did this ever get fixed for you?

 

Also the Cap1 card will help you. It gained me about 70 points believe it or not (along with my Macy's card). I just left my credit alone for about 1-2 years and forgot about credit completely. You won't fix your credit trying to get credit every other week. Be smart.. in the long run it will pay off, please take my advice.

Message 10 of 10
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