Score dropped 26 points

[Anonymous]

Immediately after opening up a new auto loan, resulting in two new inquiries (dealer and finance company), my FICO score dropped 15 points and then 11 more points 11 days later when the loan was finalized - taking me from an "exceptional" rating over 800 to a "very good" rating. There were no other changes in my spending or credit use and this came two weeks after another auto loan was paid off.  A lower score means a geater credit risk. It makes no sense to me that I am a greater risk now.

[aav]

That is a big and disappointing drop. Both of those events trigger drops and together amplify the drop. 2 inquiries will do that and maintaining a mix of loans is part of the score as well. The score will likely go up a bit when the new loan starts reporting then work your way back up slowly.

[Anonymous]

did you get financing beforehand or at the dealer? if you did it at the dealer then that means they ran your credit through about 4-10 different banks and the inquiries is why your score dropped. your score is strong so it won't take much to go back up. also, your credit card companies won't view you as a risk due to that

[Anonymous]

I got the financing at a Honda Dealer and what I don't get is one inquiry is from the dealership and the other is Honda Finance who made the loan at their best rate. Why do they need to do two inquiries anyway - and I thought inquiries only hurt if it doesn't result in a new account. It's like I got an 15 point drop just for the crime of applying and another 11 points when the loan opened! Plus - do I understand right that paying off the other loan in full after five years could have been resposnible for one of the drops?

[Anonymous]

inquiries hurt no matter what my friend

[Anonymous]

Well, that's not encouraging. A new car is my next puchase when I leave the garden. May have to stay in the garden longer than planned to get my scores ready for the hit. Thanks for the information, though!

In my wallet: Capital One (secured) 1917; Quicksilver 5000; Venture 15,000; Barclay Apple Rewards 2000; CareCredit 3300; Bank of America Platinum Visa 2000; Bank of America Travel Rewards 3500; Bank of America Travel Rewards 3500; Amazon Store Card 5000; Discover 10,000. Total Credit: 51,217.
6/13-FICO: EQ - 764; TU - 717; EX - 681; GOAL: 780 across the board. Gardening until further notice.

[Anonymous]

well if you go through your bank directly it's only one pull versus multiple

[Revelate]

Auto inquiries behave the same as mortgage inquiries.

30 day grace period, 45 day dedupe window under the FICO 8 algorithms.  It is common for the dealer to pull credit in addition to shopping loans to lenders.  

It's not worth worrying about as on the assumption they're coded as auto (most are) won't impact your credit other than 1 inquiry 30 days after it occurs if you make them all in short order.  Note EX '98 which is a mortgage score, only rolls up 2 weeks so it behooves everyone not to apply until they're ready to buy in this instance then address it quickly.  Given the pace of auto loan financing, this shouldn't be an issue once you've determined what car you want.

[Anonymous]

Thank you REVELATE for the info - but none of that explains why after purposely waiting until another car was paid off - I bought another car - and as a result, my 822 FICO went to 796.  If FICO is some type of risk index - this is insane. Plus - the most frustrating part is I don't know how get a good answer from Mr. FICO as to why.

[Revelate]

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@Anonymous wrote:

Thank you REVELATE for the info - but none of that explains why after purposely waiting until another car was paid off - I bought another car - and as a result, my 822 FICO went to 796.  If FICO is some type of risk index - this is insane. Plus - the most frustrating part is I don't know how get a good answer from Mr. FICO as to why.

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We're only just now starting to get some data when it comes to installment loan utilization which appears to be a much larger factor in FICO 8 than it was in prior versions.  At least from testing so far, it appears that FICO 04 may have skipped it altogether as the only mortgage score which appears to move as a result of our recent testing is EX 98.

Under my and some other individual's current working theory, paying off one loan and opening another, basically resets your installment utilization calculation from some small number to some large number (especially when we're talking auto loans which are comparitively large to most other installment loans other than mortgages) and that's what causes the drop in points.  

We don't know this is 100% accurate (and we'll never get better than anecdotal data on this one) yet but so far the data seems to point this way.

Gory details if you're interested:

http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Installment-tradeline-utilization-thread/m-p/4055989#U4055989