Balance decrease and FICO SCORE DROP

[ineedcreditbad]

Is it common for fico score to go down if you pay off balances.

I recently paid of my car loan of 17K and score dropped by 18 points.13 points due to decrease in balance of credit cards.

Thanks

Raj

[bdhu2001]

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@ineedcreditbad wrote:

Is it common for fico score to go down if you pay off balances.

I recently paid of my car loan of 17K and score dropped by 18 points.13 points due to decrease in balance of credit cards.

Thanks

Raj

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It's common when you've changed your mix of credit.  Your car loan is an installment loan.  If that was your only installment loan, then you're now leaving % of FICO that's based on installment loans on the table.  "FICO Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans."  Although, it lists 5 things, I consider it revolving and installment. Your car, mortgage, and student loans are installments. Credit cards and retail accounts are revolving. If you've eliminated your only installment account, then you're leaving all of a possible 85 pts on the table (If you'd be at 850 otherwise).

Anyway, you've basically messed with your mix of credit.  Had you paid off a credit card, your mix of credit would still be the same. But when you pay off an installment account, your mix of credit changes.