Why did my score go down after car was paid off?

[Anonymous]

Why did my credit score go down 32 points when I paid off my care. There was never any late payments. This was a 4 year car loan. Im looking into buying a new care later this year. the drop in points really is a problem. Any help will be very kind.

Thanks.

[CH-7-Mission-Accomplished]

It happened to me, too and it happens to lots of people.  The problem is the 10% of score for credit mix.  FICO wants you to have an installment loan.

I recommend that you open a "credit builer" installment loan at a credit union that reports to all three bureaus (Alliant is open to anyone if you join a charity on their list).  Just put in like $500 and set it up for two years.  Your score will recover in a few months.

Then when you get the new car loan, you can close the credit builder.  You will only be out a few months of interest at 2% to 3%.  You get your principal back.

This is a very common complaint about FICO but it is just the way it is.

[HiLine]

We discussed that here: http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Why-paying-off-your-loan-is-bad-for-your-...

What is your current score? It may be good enough for the next auto loan already.