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Paid off car, my score dropped 17 points as a result

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greasypeanut
Established Member

Paid off car, my score dropped 17 points as a result

Hello All,

 

I just got an alert that my EQ score dropped. After checking it, my score dropped due to my car loan being reported as paid off. I paid off my car in March 2015. I am wondering, how is that possible???

eq score 789-----ex score 794

CSP $10k - - - - - Freedom $11k
TY Pref $6.8k - - - - - Forward $13.1k
Blue $20k - - - - -Cash + $19.5k
Venture $15k - - - - -Best Buy RZ MC $4.5k (1st card 10 years ago, refuse to attempt CLI due to HP)
Message 1 of 6
5 REPLIES 5
Anonymous
Not applicable

Re: Paid off car, my score dropped 17 points as a result

It's perfectly normal. When an installment loan is paid off, it is no longer part of the Fico scoring "mix", and generally results in a score decrease.

Message 2 of 6
jamie123
Valued Contributor

Re: Paid off car, my score dropped 17 points as a result

I'm guessing that the auto loan was your last open installment loan? FICO likes you to have an open installment loan on your reports and will give you points for it over time. You lose most but not all those points once the loan is closed.


Starting Score: EQ 653 6/21/12
Current Score: EQ 817 3/10/20 - EX 820 3/13/20 - TU 825 3/03/20
Message 3 of 6
greasypeanut
Established Member

Re: Paid off car, my score dropped 17 points as a result

thanks for the info guys. yeah its my last loan on my record.

 

would it have made a difference if the loan was not paid off early?

eq score 789-----ex score 794

CSP $10k - - - - - Freedom $11k
TY Pref $6.8k - - - - - Forward $13.1k
Blue $20k - - - - -Cash + $19.5k
Venture $15k - - - - -Best Buy RZ MC $4.5k (1st card 10 years ago, refuse to attempt CLI due to HP)
Message 4 of 6
FocusedAndDetermined
Senior Contributor

Re: Paid off car, my score dropped 17 points as a result


@greasypeanut wrote:

thanks for the info guys. yeah its my last loan on my record.

 

would it have made a difference if the loan was not paid off early?


You continue to receive the "mix" points as long as the loan is open on your file.  Once it is paid off, you lose points.  Not sure the drop would have been as steep had you stretched it out a bit longer.

 

I know it seems counterintuitive to be penalized for owing less money, but that is the whacky world of FICO scoring.  Don't fret over it too much.  As long as you continue to manage your other credit well you will get some of the points back.  It's better to not owe money - FICO scores aren't everything, although it may seem that way when you spend a lot of time one these boards.Smiley Wink

 

I lost a bunch of points (don't recall exactly how many) when I paid off my remaining student loans.  I'm totally happy to have that monthly payout go to savings and travel.

Message 5 of 6
Revelate
Moderator Emeritus

Re: Paid off car, my score dropped 17 points as a result

I think whether we call it mix (as we historically have with FICO 04 and earlier) or open account calculation is pretty irrelevant: in FICO 8 we apparently take a drop for not having a certain number of accounts (both installment and revolving based on reported information here) is pretty meaningless.

 

Last installment loan paid, yup, negative.  

 

Auto loan paid, most people have reported a drop; that may be nearly all that have reported as people don't rigorously track scores and we rarely get a SNAFU post, just when something really goes awkward out of the ordinary like a substantial drop from the loan repayment as an example.

 

Installment loan paid with other installment loans on file, harder to say but I took two drops (1 auto 1 other secured loan paid) with 2 left on my report so there may be some installment utilization metric or similar too... this is a difference from FICO 04 and earlier I believe as we only used to drop a handful of points on paying off an installment loan even when it was last loan (3-4 was the number commonly tossed around here a few years ago IIRC), and in my case my FICO 04 numbers are well higher now than my FICO 8's and that wasn't the case before I paid off the loans.




        
Message 6 of 6
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