your guestimation on score increase after 100 pt hit after payoff.

[Anonymous]

Hey guys, so i took over a 100 point hit on both Equifax and Experian after a personal loan got payed off monthly over 5 years. They went from 795 to 685 after i got the change alert. What do you think will be the estimated time frame based on personal experience for the score to get back up to the old score? Thanks

[Anonymous]

Was that your only open installment loan?  No other car loan, student loan, mortgage, etc?

If that is indeed your only open I-loan, and if the score loss really is attributable solely to the loan being paid off, then we can give you an easy way to get your points back.  Just add a $500 share secure loan, pay off most of the capital early on, and then keep the loan open for the full term of the loan (see if you can get one for at least 4 years, 5 is better of course).  Alliant is a lender that seems very receptive to this approach.

The score loss seems pretty extreme, however, for it be attributable solely to the I-loan closing.  Pull your credit reports for the next couple months and see if there is anything unusual.  Also look to see whether one or more of your credit cards could have had a very high utilization around that time.  Do you know what your CC utilization is at all times?  What is it now and what was it for the last few months?

[Anonymous]

Yes that was apparently the sole reason for the drop. Both agencies are reporting the same thing. It seems kind of excessive for just one loan falling off IMO but no other alerts were issued. I have only one card open and it's always at or near max but paid on monthly like clockwork.

[Anonymous]

Thanks for conveying that you have exactly one open credit card, and that it is nearly always near the maximum.  That means (if I understand you right) that you have three different CC-related factors that are costing you a lot:

*  Overall utilization

*  Utilization of each card considered separately.

*  Number of cards reporting a balance

The first two factors are reporting near 100%, which is very bad for your score.  And for the last factor, ALL of your cards (namely 1) are reporting a balance.

You will get a huge scoring benefit if you pay the card down a lot shortly before the statement prints, so that you are reporting a very low utilization.  Right now, since you have only one card, that might mean making two payments (one 5 days after the billing cycle starts and one 5 days before it ends).  For the last factor, you will get a scoring benefit if you were to add a couple more cards, so that any time you needed extra points you could pay most of your cards down to $0 and let the one remaining card report a balance.

I asked if the installment loan you paid off was your only open installment loan.  That would be very helpful information at assessing why the drop occurred.  Can you clarify?

[Revelate]

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@Anonymous wrote:
Yes that was apparently the sole reason for the drop. Both agencies are reporting the same thing. It seems kind of excessive for just one loan falling off IMO but no other alerts were issued. I have only one card open and it's always at or near max but paid on monthly like clockwork.

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Thin file, which is probably why your score took such a hit for having a very positive installment tradeline being closed under FICO 8.

Have to ask, when are you planning to apply for anything real, namely car or mortgage?  If it's a while, go pull the secured installment loan trick CGD mentioned (especially if that was your only installment loan), and open up two more credit cards.  Also as CGD suggests, you probably don't want that card reporting a balance anywhere near max when it's time to apply, rather surprised your score was that high with a maxxed out credit card... could have been a change in reported balances potentially so you might get some of those 100 points back through prettying up the utilization, but I'd still go and thicken your file ASAP.

[Thomas_Thumb]

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@Anonymous wrote:

Hey guys, so i took over a 100 point hit on both Equifax and Experian after a personal loan got payed off monthly over 5 years. They went from 795 to 685 after i got the change alert. What do you think will be the estimated time frame based on personal experience for the score to get back up to the old score? Thanks

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The closed installment loan is good to have on file. Your score should rebound quickly but may not reach the prior level anytime soon. Fico 8 does appear to reward those with an open installment loan - even though a closed installment loan does help credit mix..

Not sure what is holding your score below 700 unless you have a baddie on file or don't have a few revolving credit cards with at least a year or two of age.

Edit add: A thin file having it's primary credit card reporting at or near the max CL can drop score big time - particularly if it is your only card with a significant CL. If you can reduce/maintain the reporting balance on the card below 30% it should help your score significantly.

[jamie123]

Credit cards are the foundation of rock solid, high and stable credit scores. That's the reason your scores are swinging wildly. You don't have enough open credit cards. You need to have a minimum of 3 open credit cards to acheive the highest scores. The age of the credit cards is also very important so you want to get started on building your credit profile as soon as possible.

At the end of your credit building journey you really should have 5 to 8 quality credit cards that you can keep open for life. You need to make a long term plan. Building good credit is a marathon and not a sprint.

My suggestions:

1. Pay down your credit card balance to less than 10% of its credit line 3 days BEFORE the due date. Wait for 6 days AFTER the due date and apply for 2 credit cards. Do not use the credit card during this time.

2. You need to apply for quality starting cards that you have a good chance for approval. Some cards are harder to be approved for than others so you don't want to apply for those cards just yet. I would suggest the Discover IT and Capital One Quicksilver as great starter cards.

3. Wait for 6 months to a year and then apply for 2 more quality credit cards.

To have really high credit scores you need to have a lot of old open credit accounts that you don't use very much. You need to keep reporting balances under 10% of the credit line to achjeve the highest scores.

[Anonymous]

Yes actually this CC is the last line of revolving credit besides an open car loan. I had two other loans close out within about two months of each other. One was a personal loan and the other was for furniture after I bought a house. So this CC is really the only open revolving account left.

[Anonymous]

It sounds like you currently have an open car loan that you are still making payments on.  Is that right?

Given that you had a big open installment loan still open, I am surprised that you took such a gigantic hit (110 points!).  It must mean that having a small number of open accounts can cause REALLY crazy behavior in a score.

*  What was the original amount that the car loan was taken out for?

*  How much do you currently still owe on the car?

*  What was the original amount that the personal loan was taken out for?  (The one you paid off in the last month or two.)

I am trying to figure out what your "installment utilization" was before you made that last payment on the personal loan, and then after.  (Before the big score hit and then after.)  There's a chance that your personal loan was originally for a huge amount, more even than the car.  And thus your installment utilization rose a lot after the personal loan closed.

Before it would be:

    (Amount currently owed on the car + amount owed on the personal loan)

    divided by

    (Original amount of the car loan + original amount of the personal loan)

After it would be:

     Amount currently owed on the car

     divided by

     Original amount of the car loan

Actually, if you really want to be sure, we should also find out the original and final amount owed (just before closeout) on the furniture loan too.  It sounds like you are saying that you also had a loan for furniture that closed out near the same same time.

[NRB525]

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@Anonymous wrote:
Yes actually this CC is the last line of revolving credit besides an open car loan. I had two other loans close out within about two months of each other. One was a personal loan and the other was for furniture after I bought a house. So this CC is really the only open revolving account left.

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What is the credit limit of this credit card, and what is the last statement balance that reported?

I hope the underlying theme of the advice here gets through: Keep tradelines open if possible, get more credit cards even if you only run a few charges through each month, and get back on track with a simplified shared secure loan. 100 points... ouch.