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FICO's Drop After Car Loan Paid Off!

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happy0510
Established Contributor

Re: FICO's Drop After Car Loan Paid Off!

Both DH and myself recently lost points for paying one of ours too. We still have an open installment 1 year into 3. Expecting it to bounce back within 3 months hopefully!


Starting Score: 615
Current Score: 709
Goal Score: 750


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Message 11 of 13
Revelate
Moderator Emeritus

Re: FICO's Drop After Car Loan Paid Off!


@elim wrote:

ahhhh,  The big Fair Isaac mystery.  

 

I can't see you being a greater risk by lowering your DTI.  I can only see you being ready to make a new auto purchase at a higher interest rate due to a score drop from paying off your loan.

 

Sounds fishy to me and always has.


FICO doesn't calculate on income (it's not even on the credit report FWIW) so DTI is meaningless and a $500 secured loan is the same as a $5M mortgage.

 

It's not really arguable that people with more outstanding obligations are more likely to default; on the flipside their data demonstrated those that had successfully navigated the installment waters and had a pretty balance remaining on the tradeline, were less likely to default.

 

It's just data analytics, and FICO doesn't calculate on absolute values unlike what Vantage Score appears to do.  That may change in the future but for now it's what we have.

 

Full gory thread, I'll admit it needs cleaning up but if anyone wants the full details on FICO 8 installment utilization, it's likely worth a read:

 

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Installment-tradeline-utilization-thread/...

 

End of the day do what's good for you financially and don't sweat the FICO stuff.  I bought a house and promptly lost 25 points across the board even if financially I'm in a better spot as a result and now if I flake creditors just take a lien on the home... but FICO doesn't look at it that way.  Car or mortgage refinances similar, if it saves you non-trivial money or improves cash flow, do it.

 




        
Message 12 of 13
girlinthecity
New Member

Re: FICO's Drop After Car Loan Paid Off!

Thanks Elim (and everyone really) -

This is nonsensical and insane. This thread is very helpful. 2 out of 3 scores have bounced back but not to the levels they were before.
Message 13 of 13
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