Reply
Established Contributor
masscredit
Posts: 773
Registered: ‎07-17-2012
0

Car loan paid off, lost 7 points

I recently purchased another car. $20k loan in addition to my other auto loan and no score change. The new loan was even reporting. Sold the other car and paid the loan off. That just reported and my score dropped by 7 points. I expected it to go down because I had two loans. Not because I paid one off.

|****$6000****|****$6000*****|****$4500*****|****$2500****|****$1600****|****$3000****|******$1350******|*****$700*****|
EX - 657 (MyFico 10/02/14) TU - 655 (Walmart 10/10/14 ) EQ 04 - 699 (DCU -09/26/14) EQ 08 - 658 (MyFico -10/25/14)
Frequent Contributor
blondy250
Posts: 458
Registered: ‎01-03-2013
0

Re: Car loan paid off, lost 7 points

Sounds about right.


MyFico 4/18/14
Experian-820, Equifax-834, Transunion (Discover)--850-- 7/6/14
Aaoa-9yrs, Oldest-14yrs
1 inquiry equifax 04 Chase mortgage
"Because your FICO® score is exceptionally high, there are no actionable negative factors present with your score".
Community Leader
Valued Contributor
user5387
Posts: 1,794
Registered: ‎07-01-2010
0

Re: Car loan paid off, lost 7 points

New installment loans can hurt you in the short term, because of hard pulls, new tradelines, and lowered AAoA.

 

Paying off an installment loan can hurt you because sometimes you get a bump for "mix of credit types" with open loans.

 

New installment loans hurt DTI, and closing them out helps DTI.

 

New Member
Flaca66
Posts: 6
Registered: ‎01-22-2014
0

Re: Car loan paid off, lost 7 points

That isn't what I was expecting to hear.  I just paid off all my car loans and am now debt-free.  I was surprised to see that my score did not go up.  And now you say that it will probably drop?  I guess I am doomed, since I no longer have any credit mix at all, except for my credit cards, which are all paid off every month.



Starting Score: EX 808 EQ 777 TU 788
Current Score: EX 808 EQ 802 TU 792
Goal Score: 825


Take the myFICO Fitness Challenge


Moderator
Revelate
Posts: 9,547
Registered: ‎12-30-2011
0

Re: Car loan paid off, lost 7 points

[ Edited ]

Flaca66 wrote:

That isn't what I was expecting to hear.  I just paid off all my car loans and am now debt-free.  I was surprised to see that my score did not go up.  And now you say that it will probably drop?  I guess I am doomed, since I no longer have any credit mix at all, except for my credit cards, which are all paid off every month.


This is all anecdotal unfortunately but it's a common enough occurence that it bears mentioning.

 

Many members have reported a small decrease in their FICO score if they had less than two open installment loans reporting; however, we're talking single digits - masscredit has excellent credit (800ish) if I recall correctly, so anything possible is magnified by a large amount compared to mere mortals such as myself.  Typically from what I've read here over the years it's a 2-4ish point swing.

 

That said, this isn't the mix of credit function to my limited knowledge: anything on the reports will hit that portion of the score card and the drop would be more signifcant if that were the way it was calculated in my estimation.  Personally I gained on the order of 3x the points that masscredit lost when I added an installment loan to my mix and that was with my deep, deep subprime score range.  It's probably not fully apples to apples, but with so many other zero sum positives / negatives in the algorithm I'd expect it to be a much larger loss in MC's case if were that.

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


Take the myFICO Fitness Challenge
Established Contributor
masscredit
Posts: 773
Registered: ‎07-17-2012
0

Re: Car loan paid off, lost 7 points


user5387 wrote:

New installment loans can hurt you in the short term, because of hard pulls, new tradelines, and lowered AAoA.

 

Paying off an installment loan can hurt you because sometimes you get a bump for "mix of credit types" with open loans.

 

New installment loans hurt DTI, and closing them out helps DTI.

 


The HP, new tradeline and lower AAoA didn't have any impact on my score. I expected to see that happen when the new loan showed up on my CR and thought I might take an additional it because there would be two auto loans reporting. My score dropped when the old loan was reporting as paid/closed.  I thought that was strange.

 


Flaca66 wrote:

That isn't what I was expecting to hear.  I just paid off all my car loans and am now debt-free.  I was surprised to see that my score did not go up.  And now you say that it will probably drop?  I guess I am doomed, since I no longer have any credit mix at all, except for my credit cards, which are all paid off every month.


One thing that you can do is let one card report a balance. Maybe between 5-8% of your total avaialble credit. Then pay it off before the due date and you won't pay any interest.  That should provide you with the best score for your current credit profile.

 

 

 


|****$6000****|****$6000*****|****$4500*****|****$2500****|****$1600****|****$3000****|******$1350******|*****$700*****|
EX - 657 (MyFico 10/02/14) TU - 655 (Walmart 10/10/14 ) EQ 04 - 699 (DCU -09/26/14) EQ 08 - 658 (MyFico -10/25/14)

myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.

>> About myFICO
FICO Score - The Score that matters
Click to Verify - This site chose VeriSign SSL for secure e-commerce and confidential communications.
Fair Isaac Corporation is a BBB Accredited Financial Service in San Rafael, CA
FOLLOW US Social Media Facebook Twitter Pinterest Google+
}