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PLEASE HELP!!! Score drop from Auto loan payoff

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Anonymous
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PLEASE HELP!!! Score drop from Auto loan payoff

I need help! I have worked hard to rebuild my credit.  Paying off credit cards and no late payments in 5 years.  I just bought a new car because I had to get a small SUV for my business.  This is the first time I have not paid a car in full before getting a new one.  Anyway, my credit report just reflected my old car being paid off with Fifth Third Bank, never a late payment and it dropped my score 19 points?  This is so upsetting why would paying off a car drop your credit score?

Message 1 of 11
10 REPLIES 10
Anonymous
Not applicable

Re: PLEASE HELP!!! Score drop from Auto loan payoff

This question gets asked once a week -- FICO penalizes you for not reporting an OPEN installment loan.

 

If you have no mortgage, student, auto or personal loan reporting as OPEN, you will get dinged up to 20 points.

 

The Alliant SSL trick is suggested for thsoe who don't need a real loan -- it costs only a few bucks and sticks on your report positively for 4-5 years.

 

Note that this is also true of credit cards!  If you pay all your cards to $0 you get dinged, but if you let ONE card report $5, your score goes up.

Message 2 of 11
Anonymous
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Re: PLEASE HELP!!! Score drop from Auto loan payoff

Thank you so much for replying.  But I opened a new auto loan as well, I just traded in my car.  So once it reports will I likely recover those points? 

Message 3 of 11
Anonymous
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Re: PLEASE HELP!!! Score drop from Auto loan payoff

Yes, but maybe not instantly.

 

We don't have the data points on installment loan utilization yet.  There are rumors and some random data points that a NEW installment loan reporting 100% balance will give you SOME points back, and once you pay it down a little you should get all points back.  We're not sure if 99% balance or 95% balance or 90% balance is where most of the points return.  

 

Installment loan utilization is way less important for FICO scoring but it does have SOME effect.  Reporting 100% balance will still get you some of those points back.

Message 4 of 11
Anonymous
Not applicable

Re: PLEASE HELP!!! Score drop from Auto loan payoff

Thank you so much you have no idea how helpful you have been.  I actually just checked and the new loan posted to my report the same day that the old loan did that gave me the 19 point drop.  So I am hoping that over time I will recover those points.  It was just a little devastating to see that drop when working so hard.  Smiley Happy

Message 5 of 11
Anonymous
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Re: PLEASE HELP!!! Score drop from Auto loan payoff

Yeah, it's one of those FICO annoyances for sure.  If you aren't planning any major credit applications in the next month or two, don't sweat it at all.  But do report back on this thread once your report updates that the balance on the new loan has dropped from 100% and let's see if your scores report higher!

 

Where are you pulling your FICO scores from?

Message 6 of 11
Anonymous
Not applicable

Re: PLEASE HELP!!! Score drop from Auto loan payoff

I get them here at myfico.  I pay for the monthly service.  Yes I am not planning on any credit appliations since I am planning to buy a house at the first of 2018.  I will be sure to report back.

Message 7 of 11
Anonymous
Not applicable

Re: PLEASE HELP!!! Score drop from Auto loan payoff

Sounds good -- the general consensus is to avoid new credit inquiries for 6 months leading up to the mortgage application and then waiting at least 3 days after closing before applying for new credit.

 

For maxing out your FICO08 scores (not used for mortgages!) you want to have at least 3 credit cards reporting and only show a small balance reported on ONE credit card ($3 to up to 9% of your limit).  You also do want to show an open installment loan for at least the Experian credit score for mortgage scoring purposes.  So you're in great shape!

 

If you have any utilization on your credit cards, getting them all to $0 except for one will max out your scores -- also make sure you have 3 credit card accounts open and in good standing overall.

Message 8 of 11
rmduhon
Valued Contributor

Re: PLEASE HELP!!! Score drop from Auto loan payoff

I'd go with at least $10-15 reporting to be safe because some credit card companies won't bother reporting a few dollars and just report zero.
Message 9 of 11
Reighn9
Frequent Contributor

Re: PLEASE HELP!!! Score drop from Auto loan payoff

My FICO scores dropped 25 points plus on each CRA in March when I paid my car loan off. I had. 2 other installment loans. I keep being told that can't happen. Some CCCs picked that time for an account review which resulted in CLDs. It is discouraging when you are trying so hard to get up and no one sees it.
Message 10 of 11
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