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

Senior Contributor

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

Now that makes sense, as your installment loan utilization went from probably single-digit territory prior to you paying off that 5 year loan to maxed-out territory with a new mortgage (and lease) reporting.  Overall installment loan utilization shooting up 90% no doubt would drop scores 20-25 points or so.

Message 81 of 90
Established Member

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

Just happened to me.
Score dropped 40 points after paying off my loan.

Message 82 of 90
Senior Contributor

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

If you want your 40 points back, definitely look into the SSL technique.

Message 83 of 90
Super Contributor

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

Just want to make a point that we are mostly talking about FICO Classic 8, which does indeed drop some points when a loan is paid to zero, or when other significant changes happen to one's overall installment utilization percentage.

 

But the FICO mortgage scores are much less predictable in how they react to changes in overall installment utilization. In my personal experience, TU FICO 4 was about 40% as sensitive as FICO 8, while EX FICO 2 didn't react at all. Others are of the view that the TU score and EQ scores don't react, while the EX score does.

FICO8 EQ 725 TU 752 EX 736 Total revolving credit 454300
Message 84 of 90
Established Member

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

Same thing happened to me. I paid off my car loan satisfactorly and my Experian FICO score dropped 26 points. It's all a scam.

Message 85 of 90
Senior Contributor

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

It's not a scam, you just need to know how to use the system to your advantage and you won't experience a point drop, or you can get them back just as quickly as you lost them.

Message 86 of 90
Established Member

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

Guys I got a small loan from Lending Club.
It just happened a few days ago so it hasn't reported entirely.
What should I expect
Message 87 of 90
Senior Contributor

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


VeryCoolAlan wrote:
Guys I got a small loan from Lending Club.
It just happened a few days ago so it hasn't reported entirely.
What should I expect

I don't really understand what you are getting at.  What do you mean hasn't reported entirely?  The loan will either be on your report or not be on your report.  There's no in between here.  What do you mean by what should you expect?  Do you mean scoring wise?  It depends if you have any other open installment loans and what balance will report on this new loan you just added relative to the starting balance.

Message 88 of 90
Established Member

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

I meant that it has reported the inquiry but hasn't added the debt to my report.
It still says I have 0 loans.
Message 89 of 90
Senior Contributor

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

Any inquiry and a new account while related to one another are two different things with respect to your credit report.  Once the inquiry shows up, which is usually almost instantly, you'll experience any score drop related to that inquiry right away.  The new account may show up in a couple of weeks, or could take as long as a couple of months.  It all depends on the lender.

 

What will happen to your score when the loan shows up on your credit report depends on the balance relative to the original balance.  Say it's a $1000 loan.  If when it reports you have it paid down to $900, you're at 90% utilization.  If you immediately pay it down to say $50 though and it reports $50 against the $1000 original balance, you're at 5% utilization.  In order to answer your question as to what may happen with your score we'd need to know what percentage you believe your loan utilization will be at when it reports.

Message 90 of 90