Interesting Data Point - paid off Chase Auto Loan

[Anonymous]

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@StartingOver10 wrote:

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The 17 point loss was just on TU. The day before EX had lost 11 points. EQ hasn't reported yet.  Do you typically report the point loss across all three CRAs? If so, it will easily be more than 30 points lost over 3 by the time EQ reports. 

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The 30 point loss (or gain, depending on whether your profile is are losing or gaining an open loan) typically happens across all three bureaus each.  Thus each score changing by 30.  That number is a rough estimate of course.  A person's score would not change by exactly the same number for each bureau, nor do two people's score's change by the same number.  Bob might get a benefit of +40 / +39 /+34 -- and Sue might get a benefit of +28 / + 31 / +29. 

The case of "Bob" above is based on a recent case study reported on the Forum.  It's fairly typical, so the "30" number I quoted may be a bit of an underestimate.

Also many people report a huge loss when their only open loan closes (assuming it was almost all paid off).  This is why Thom Thumb and others expressed surprise your loss was so small.

[StartingOver10]

I wonder if it is because I have a Bk on my CR from 2008 so my file isn't clean. No collections. No late payments. Plus my scores are in the low 700's due to the debt, so the impact would be less than if my score was in the 800's (from what I understand). 

Plus I have several closed and paid auto loans and mortgages.  I recently lost 4 mortgage TL's because they were paid and closed over 10 years ago. I also lost 3 paid and closed auto loans due to the reporting period exceeding 10 years.  I don't know if this affects my FICO 8 scores, but it did affect my FICO 4 scores.  

[Anonymous]

Yup.  I thought that too.  I totally agree.

It's likely (to take your first point) that the benefit varies according to scorecard.  People with severe derogs (e.g. a bankruptcy) we know have some kind of maximum ceiling to their score.  You already have (for a person with a bankruptcy) a high score.  Furthermore, you also later explained that you currently have very high CC utilization.  Therefore it is likely that the thing that was really preventing your score from being maxxed out was the high CC debt.  If, you were to pay your CC util down to < 9% and create several $0 balances on your cards as well, that might well take you as high as you possibly could go.  In other words, you simply didn't have room for a 40 point increase.

It's also possible that FICO 8 looks at the extremely wide range of closed installment loans on your report and is giving you some "credit mix" points for that.  (You won't be getting points for installment utilization in the Amounts Owed category, but as per the paragraph above maybe you don't have "room" for those.)  BTW, I am not 100% certain whether you currently have a wide range of these on your report, or whether you did have a wide range but they are all gone.  Your last post could mean either one.

Thanks for letting us know about those two facts about your profile.  (As well as the third fact about the high CC util.)  Your intuition strikes me as very sound.  That's what explains it.  (Especially the first issue: the bankruptcy.)

It's also a good case study in why a "data point" in itself (as often reported on the forum) often tells us nothing.  It's the data point in context with the other relevant factors that tells us something.  In this case they were:

*  Does the profile have major derogs on it?

*  Is the CC util high?

*  What was the total installment util before it was paid down?

*  Does the consumer have a wide range of other closed loans on his profile?

Thanks again.  This was really helpful to me!

[StartingOver10]

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@Anonymous wrote:

Yup.  I thought that too.  I totally agree.

It's likely (to take your first point) that the benefit varies according to scorecard.  People with severe derogs (e.g. a bankruptcy) we know have some kind of maximum ceiling to their score.  You already have (for a person with a bankruptcy) a high score.  Furthermore, you also later explained that you currently have very high CC utilization.  Therefore it is likely that the thing that was really preventing your score from being maxxed out was the high CC debt.  If, you were to pay your CC util down to < 9% and create several $0 balances on your cards as well, that might well take you as high as you possibly could go.  In other words, you simply didn't have room for a 40 point increase.

It's also possible that FICO 8 looks at the extremely wide range of closed installment loans on your report and is giving you some "credit mix" points for that.  (You won't be getting points for installment utilization in the Amounts Owed category, but as per the paragraph above maybe you don't have "room" for those.)  BTW, I am not 100% certain whether you currently have a wide range of these on your report, or whether you did have a wide range but they are all gone.  Your last post could mean either one.

Thanks for letting us know about those two facts about your profile.  (As well as the third fact about the high CC util.)  Your intuition strikes me as very sound.  That's what explains it.  (Especially the first issue: the bankruptcy.)

It's also a good case study in why a "data point" in itself (as often reported on the forum) often tells us nothing.  It's the data point in context with the other relevant factors that tells us something.  In this case they were:

*  Does the profile have major derogs on it?

*  Is the CC util high?

*  What was the total installment util before it was paid down?

*  Does the consumer have a wide range of other closed loans on his profile?

Thanks again.  This was really helpful to me!

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To answer your questions directly:

• Yes, major derog - Bk 2008 (filed) and discharged Jan 2009
• CC utilization is currently high - 35% overall.  
• Total installment util prior to payoff was 2.83% 
• Yes, I have a wide range of other closed loans: 28 TL's, all types open and closed: 9 cc's with balances - 4 remaining auto loans all paid and closed included in the 28 TLs after those other paid auto loans dropped off due to age.  No lates or derogs even during the Bk, including the one just paid off.  3 remaining mortgages paid and closed (in the 28 TL's after the others dropped off).  No student loans (paid off many, many years ago). No accounts labeled "Consumer Finance".  No other debt.  I do get the 'Exceptional' label for the mix of credit.

Right now, the thing holding me back is the high debt (working on paying it down) and the Bk. I understand that the Bk will drop off at 10 years. The debt will be under 9% by Dec 2016 but the Bk won't drop off until Sept 2018 unless I can get EE.

According to the simulators, I can get to 765 on FICO 8s even with the Bk. I am looking forward to that and will post the reality of my scores when I get my debt to less than 9%. 

[StartingOver10]

Well, EQ just reported. 32 point drop from 714 to 682 but that is not a clear data point.

I say that because one of my cc's reported at the same time and its utilization increased by $687.   So the alert shows 32 point drop for increasing the balance on that credit card and zero change for the pay off of the auto loan. It's clear that the revolving debt trumps the installment debt, which we knew all along. 

[grillandwinemaster]

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@StartingOver10 wrote:

Agreed. Can't wait to see what TU and EQ do though 

Although it is very nice to not have a payment

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Not having a car payment trumps the point loss!

[Revelate]

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@StartingOver10 wrote:

Just received another MyFICO alert.  My TU 8 score just dropped 17 points due to the installment loan payoff. It went from 729 down to 712.  That's a pretty hefty hit.  

I'm not going for additional credit in the next 6 months or so. I do expect to recover some of these points when I pay down my heavy debt - even without an open installment loan. If I don't see decent recovery (730 to 750) in the next few months, then I will add the Alliant loan rather than going for it right away. My intention is to pay off the wedding debt in the next 3 months and get the rest under 9% within 6 months if I need that amount of time. 

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I would suggest that leaving points on the table is suboptimal in absolute terms... especially for those of us like you and me who aren't gold plated with the sins of our past still on our reports.

Unless you need the cash immediately for sorting out the wedding debt, I'd pull the triggler on the share secured loan pretty much now and build payment history on the line in addition to sorting out the FICO 8 installment penalty.  All the usual reasons for doing it now apply from the spree metholodogy we've discussed over the years: take any negative (new account, maybe) as soon as possible.

More importantly though, end of the day life is anything but predictable, and something that has a time window of 2 months, might not be available in time for when you need it when talking scoring.  While I do think the incidental balances that get reported are wtfever, something like an installment loan where it might take a while to land on one's report, is something which should always be sorted.  I somehow doubt that a $689 increase in your balance statistically was the cause for a 30+ point drop, maybe if you went over a serious breakpoint but from 30% aggregate or whatever?  Hard to see that.

Yeah optimal would've been beforehand, but ain't no big thing to do now .

[SouthJamaica]

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@Revelate wrote:

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@StartingOver10 wrote:

Just received another MyFICO alert.  My TU 8 score just dropped 17 points due to the installment loan payoff. It went from 729 down to 712.  That's a pretty hefty hit.  

I'm not going for additional credit in the next 6 months or so. I do expect to recover some of these points when I pay down my heavy debt - even without an open installment loan. If I don't see decent recovery (730 to 750) in the next few months, then I will add the Alliant loan rather than going for it right away. My intention is to pay off the wedding debt in the next 3 months and get the rest under 9% within 6 months if I need that amount of time. 

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I would suggest that leaving points on the table is suboptimal in absolute terms... especially for those of us like you and me who aren't gold plated with the sins of our past still on our reports.

Unless you need the cash immediately for sorting out the wedding debt, I'd pull the triggler on the share secured loan pretty much now and build payment history on the line in addition to sorting out the FICO 8 installment penalty.  All the usual reasons for doing it now apply from the spree metholodogy we've discussed over the years: take any negative (new account, maybe) as soon as possible.

More importantly though, end of the day life is anything but predictable, and something that has a time window of 2 months, might not be available in time for when you need it when talking scoring.  While I do think the incidental balances that get reported are wtfever, something like an installment loan where it might take a while to land on one's report, is something which should always be sorted.  I somehow doubt that a $689 increase in your balance statistically was the cause for a 30+ point drop, maybe if you went over a serious breakpoint but from 30% aggregate or whatever?  Hard to see that.

Yeah optimal would've been beforehand, but ain't no big thing to do now .

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Agreed, better to do it now. Either way the SSL will operate as a drag on your AAoA, but (a) if you do it 2 months before you'll be stuck with ugly "Age of newest account: 2 months" factor and (b) it will be less of a drag on your AAoA because it will be a bit older.

[StartingOver10]

I see. I will revisit that then.

Yes, the $687 crossed over a big threshold  and not 30% either. I used a low limit card for misc wedding expenses and that small amount pushed my utilization up from 35% to 37% - but on that particular card it pushed it up to 82%. So this short-term debt is giving me a big drop in points. I'm not worried overall because it will be paid off in the next 2-3 months (I had a total of $26k for the wedding).  But in the meantime, I have to live with the point loss. Once I pay the $26k off I will be in good shape with my score. It doesn't help that I received two new accounts in the last 60 days either (new account penalties).