Paid off account, now my score dropped 10 points?

[Anonymous]

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@Anonymous wrote:
DEFINITION of 'FICO Score' A type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant's credit risk and whether to extend a loan. FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score.

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Why would creditors want to extend a loan to someone who won't make them money? I'm just sayin' that the reason your score drops from never carrying a balance is that you're not a "profitable" consumer. I just took a hit because I paid off my car loan. Never paid late in 24 months...but paying the loan dinged me. It will probably go up again the next time I have an installment loan, but the only reason I can reckon to penalize consumers for carrying little debt is because it shows they aren't money makers for the lenders. 

IMO, it's a racket. 

[Anonymous]

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@Anonymous wrote:
Yeah but hey why not pay $2 a month in interest to keep 10 points on your credit report. Because that's basically what you are doing.

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If you pay it the day after it reports there is usually no interest charge AT ALL. Only the predatory lenders like Credit One charge daily interest on all balances.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:
DEFINITION of 'FICO Score' A type of credit score that makes up a substantial portion of the credit report that lenders use to assess an applicant's credit risk and whether to extend a loan. FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score.

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Why would creditors want to extend a loan to someone who won't make them money? I'm just sayin' that the reason your score drops from never carrying a balance is that you're not a "profitable" consumer. I just took a hit because I paid off my car loan. Never paid late in 24 months...but paying the loan dinged me. It will probably go up again the next time I have an installment loan, but the only reason I can reckon to penalize consumers for carrying little debt is because it shows they aren't money makers for the lenders. 

IMO, it's a racket. 

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That it is, my friend, that it is.

[Anonymous]

See I understand carrying a balance.
but what I don't understand is why after showing you paid a loan for 24 months and pay it off you take a hit.
The 24 months should matter showing your responsibility to pay loans. At least for some months or years ahead. Not the fact that you're not currently paying on a loan.

[Anonymous]

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@Anonymous wrote:
See I understand carrying a balance.
but what I don't understand is why after showing you paid a loan for 24 months and pay it off you take a hit.
The 24 months should matter showing your responsibility to pay loans. At least for some months or years ahead. Not the fact that you're not currently paying on a loan.

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Thats largely because its not based on what 'makes sense', its based almost entirely on statistical modeling - very COMPLEX statistical modeling. But it also seems to have a bit of 'incentivization' built into it - hence slightly better scores for carrying a small balance, and maintaining an installment loan, and keeping accounts open and active for long periods of time.