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Paying off my car loan ruined my credit. Score dropped 70+ points.

Moderator

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.


girlyteck wrote:

My score droppped 10 points for paying off my car loan of 9G. I refinanced to pay for a boat though, waiting to see what the new loan does.


Welcome to the forums!

 

There's a few other factors besides closing the one loan and opening a new one (and it depends a lot on what score you're looking at) but assuming the boat loan reports as an installment loan, you may get some or all points back depending if and how much you get penalized for the new tradeline.  Which site / score were you using to see the 10 point drop?

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


Take the myFICO Fitness Challenge
Message 21 of 90
New Member

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Hello- The new loan is a car title installment loan. I am using MyFico to track the scoring. It went from 722 to 711. 

Message 22 of 90
Moderator

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.


girlyteck wrote:

Hello- The new loan is a car title installment loan. I am using MyFico to track the scoring. It went from 722 to 711. 


Ah, out of curiosity, how did the money work in that situation?  Took a title loan out, paid for the rest of the car, and rest went to pay for the boat?  

 

I'm more than a little curious on how the new loan will report.

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


Take the myFICO Fitness Challenge
Message 23 of 90
Valued Contributor

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

I lost points as well when my last open installment was paid.  And then I lost points again when I opened a brand new car loan.  I think the best benefit for FICO is with having at least one open installment that isn't brand new and reporting at max utilization.

 

But, of course, you also need other accounts (especially revolving credit lines) to even out your credit profile.   The highest easily controllable aspect of a FICO score is revolving utilization. 

EX:694 TU:744 EQ:777
Amex ED $19.5k - BoA Travel Rewards $15k - CSP $5k - SDFCU EMV $15k - NFCU goRewards $20k - Barclays Arrival $6.5k
Message 24 of 90
New Member

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Yes they made a check out to pay off my car and then gave me a check for the remainder (personal). I owen less on my car than what it was worth. 

 


Revelate wrote:

girlyteck wrote:

Hello- The new loan is a car title installment loan. I am using MyFico to track the scoring. It went from 722 to 711. 


Ah, out of curiosity, how did the money work in that situation?  Took a title loan out, paid for the rest of the car, and rest went to pay for the boat?  

 

I'm more than a little curious on how the new loan will report.


 

Message 25 of 90
Contributor

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

But FICO/Credit Scores are based on one's ability to borrow, as in having debt. It's not about explicity living debt free. When you don't have installment loans, it's risky for many lenders because they don't know how you will pay exactly. 

Message 26 of 90
Valued Contributor

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Monthly payments aren't even required; all you need is an open loan, preferably with a small remainder. I have prepaid my present car loan into the middle of the final month and am comfortable doing nothing between now and then. Actually then included, as the last transaction is taken care of automatically, lol.

 

Message 27 of 90
New Member

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Its sounds like Im going to take another hit. With the new loan. I pay my credit cards off every month. By revolving, you mean like store credit cards?
Message 28 of 90
Moderator

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.


girlyteck wrote:
Its sounds like Im going to take another hit. With the new loan. I pay my credit cards off every month. By revolving, you mean like store credit cards?

Depends on the thickness of your file: unless I change to a different year on the average age of accounts calculation, I don't take a drop for new tradelines.  

 

That may vary some not only on thickness but on cleanliness of your file too: I'm a mixed file and it takes a lot more than a new account to negatively impact me by any measurable amount.

Starting Score: EQ 5 561, TU 98 567, EX 2 599 (12/30/11)
Current Score: EQ 5 771, TU 4 758, EX 2 758, EQ 8 795, TU 8 762, EX 8 786 (7/28/17)
Goal Score:    EQ 5 750, TU 4 750, EX 2 750, EQ 8 800, TU 8 Blah, EX 8 800 (01/01/18)


Take the myFICO Fitness Challenge
Message 29 of 90
Valued Contributor

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.


girlyteck wrote:
Its sounds like Im going to take another hit. With the new loan. I pay my credit cards off every month. By revolving, you mean like store credit cards?

I mean any credit card or charge card.  "Revolving" is an account that doesn't have preset monthly payments and a preset amount owed.  "Paying in full" means that the full statment balance is paid by the due date and so no interest is accrued.  The new card balance at the time of each statement is what is usually reported monthly to CRAs and is used in utilization calculations.  A low utilization on revolving accounts will help greatly with higher scores.  You never need to carry balances, but a balance needs to report on at least one of your cards.  Having less cards reporting balances helps too, but you need to have at least one card with a statement balance greater than 0 to show usage.

EX:694 TU:744 EQ:777
Amex ED $19.5k - BoA Travel Rewards $15k - CSP $5k - SDFCU EMV $15k - NFCU goRewards $20k - Barclays Arrival $6.5k
Message 30 of 90