Fico Score Lowered

[kenzie18]

This may be a dumb question but I just paid off a 3 year loan in 9 months and I really thought that would look good on my credit...but my Fico score Dropped! How is that possible?! I could see it staying the same, but dropping makes no sense...

[user5387]

Welcome to the forums!

A rule of thumb is that an installment loan helps your score.

There are lots of threads around here that touch on various aspects of this issue.

Getting rid of a loan payment helps your DTI, so there's a tradeoff to be made.

[Revelate]

Likewise welcome to the forums!  Which score are you tracking?

Anecdotally we've found that without a pair (YMMV, may be 1 in some cases) of open installment loans one's FICO score will drop a handful of points, but it's usually nothing major, the big portion of the algorithm is just having any installment history on the report at all as we understand it.

[vanillabean]

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@kenzie18 wrote:

This may be a dumb question but I just paid off a 3 year loan in 9 months and I really thought that would look good on my credit...but my Fico score Dropped! How is that possible?! I could see it staying the same, but dropping makes no sense...

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I guess the logic is that once you have paid off the loan, you are no longer exercising financial responsibility. Of course you can say the same for me, except that I'm waiting with the last half a monthly payment which is due in a year and some months from now, during which time I get to keep my hard-earned ten points.