@Anonymous wrote:
A few weeks ago I sold my house and paid the mortgage off. My credit score just DROPPED 20 points because of it!!
How is that possibly a bad thing? This will now make it harder for me to get a new mortgage on the house I want to buy.
Has anyone had this happen to them or have any advice on how to get my score back up quickly?
Welcome to the forums!
TBH we're still trying to figure out how installment utilization precisely works other than open is good, low balance compared to high balance is better; many people have reported a drop especially in the FICO 8 algorithms which myFICO and others use for their monitoring solutions when a loan has been paid off.
The good news is that the older models aren't affected nearly as much, though we've had one report of Experian FICO Risk Model v2 which is a mortgage score being significantly impacted by paying off a loan but we don't really have much data on that. 2/3 of the mortgage trifecta apparently don't move much as a result of paying off a loan, so for mortgage purposes until the underwriting guidelines switch to a different FICO version, it's not too big of a deal.
I would pull a 3B report here though before shopping for a mortgage, is always good to know where one stands before talking to lenders.
As for getting score back, if you don't have any open installment lines on your report it's not a bad idea to tack on a secured installment loan or two, and there might actually be a better method too but it hasn't been tested yet (involving prepaying the loan to near zero and then just hanging onto it for as long as possible, some lender policy breaks this so it's a work in progress to even test it) so I can't really recommend playing games which cost more than trivial money to optimize one's score if it doesn't demonstratably work.
...you now have one less tradeline and one less type of credit ...ergo, your scores dropped ...that's how the Fico scoring model works
...its useless to argue that its non-sensical ...logic and common sense don't apply ...what matters is that over millions of accounts over decades of data gathering, closing of a tradeline and credit type resulted in future negative credit activity according to Fico's data analysis ...and that is it, period ...that you see it as a positive simply doesn't matter to them ...welcome to Fico scoring 101.
...you don't provide enough information to really answer your question but all else being equal, you should be able to easily get those points back by getting a small secured loan from your bank or credit union ...that adds both a tradeline and an installment loan type of credit to your file, which Fico likes ...talk to your lender of choice to see if they will report the loan immediately to the CRAs rather than wait for a routine update ...if one will, use them ...the amount really doesn't matter ...note that an installment loan isn't weighted quite as high as a mortgage so the immediate impact will probably be less than you lost ...but on-time payments for a few months will get it all back other things being normal ...also note that predicting score results from specific actions is highly dependent on the contents of your individual credit file ...ymmv
...if you want a more definitive answer you can either post the info requested in the "Do I Qualify" sticky at the top of this forum or shift your question over to the Repair Your Credit forum ...hth
