topic Re: Score drop w loan payoff in Personal Finance

Score drop w loan payoff

JustKeepSwmng — Sun, 02 Nov 2025 16:40:50 GMT

Today my FICO score dropped a whopping 34 points after my auto loan updated as paid off.

Original loan was ~60k, got totaled and paid off at $19k left.

I have open student loans and open personal loans. I thought this penalty only happened with no open installment loans?

This is upsetting, I need a new car and I am car shopping right now.

Re: Score drop w loan payoff

JustKeepSwmng — Tue, 04 Nov 2025 17:17:03 GMT

So have gone through many many threads. Still can't find a reason for this. I had been monitoring scores daily because am actively paying down utilization.

- One thought is my student loans are consolidated and deferred. Maybe they stop counting??

- That doesn't explain thoguht the $25k personal loan that is open and reporting

No negatives/baddies on any of my bureaus and they all took a 33-37 point hit on FICO 8

Re: Score drop w loan payoff

Patient957 — Tue, 04 Nov 2025 18:42:37 GMT

Hmm. Looks like you got the full penalty too.

What are the original loan amount and current balance on the $25K personal loan? Which FI is the loan from?

Also are you a member of Navy FCU or Penfed?

Re: Score drop w loan payoff

JustKeepSwmng — Wed, 05 Nov 2025 03:08:59 GMT

Right seems like full penalty.

auto loan that was paid off is BOA

personal loan is a credit union, it's newer- 3 months reporting going on 4th. At about 90%

I just became a NFCU member last week but have no products yet.

Re: Score drop w loan payoff

Patient957 — Wed, 05 Nov 2025 12:29:13 GMT

@JustKeepSwmng wrote:
Right seems like full penalty.
auto loan that was paid off is BOA
personal loan is a credit union, it's newer- 3 months reporting going on 4th. At about 90%

I just became a NFCU member last week but have no products yet.

A personal loan from a credit union should count as an open installment loan.

When I paid off my last open installment loan in 2023, I got the penalty, -32 points. I got this reason code from MyFico:

You can take a look at your MF account and see if you got this reason code, or any new reason codes. That would give a clue about what's going on. Did you get any new reason codes on MF?

Maybe this is because your B/L ratio increased when your nearly paid off auto loan got paid off.

Re: Score drop w loan payoff

JustKeepSwmng — Wed, 05 Nov 2025 18:01:19 GMT

Yes I think it's the B/L change. Because the new loan is at high % and the one that was 30% got paid off instantly.

The MF has a reason code of high loan balances.

Had no idea that was a 30+ point risk. Now I see why some people take a larger loan to pay a portion immediately.

Re: Score drop w loan payoff

Patient957 — Wed, 05 Nov 2025 18:16:33 GMT

@JustKeepSwmng wrote:
Had no idea that was a 30+ point risk.

I didn't either. Looks like a high B/L is just as bad as no installment loan at all.

Re: Score drop w loan payoff

TrapLine — Thu, 06 Nov 2025 10:13:34 GMT

Welcome to the real world of credit. There are many of us that have experienced similar credit point reductions when a mortgage or installment loan is paid off.

In my case it was 22 point reduction on an installment loan. When I paid off the mortgage it was a much larger amount (can not remember how much).

The whole world of credit reminds me of a pinball game!

Re: Score drop w loan payoff

Realist — Sun, 09 Nov 2025 19:16:18 GMT

The point where interest rates matter is with mid to extended loans.

If you plan to acquire the shortest term possible, securing the lowest rate possible, and prepaying down the loan as quickly as possible, they don't earn much in interest.

When all possible, strive for those repayment methods. But, with any significant change in debt occurs, or elimination of one, always expect a score reduction at least short term.

Re: Score drop w loan payoff

Jessie — Mon, 17 Nov 2025 23:36:08 GMT

Just give it a little time. It should bounce right back...

Re: Score drop w loan payoff

TrapLine — Tue, 18 Nov 2025 08:25:02 GMT

@Jessie wrote:
Just give it a little time. It should bounce right back...

Mine never completly returned as I did not have an installment or mortgage loan. Remember, the credit reporting is looking for some debt not a clean slate. For a long time I had no debt and my scores never hit the maximum. As soon as I took on a mortgage I reached Fico 08 850 and sat there for five years. It is a game!

Re: Score drop w loan payoff

MarkintheHV — Tue, 18 Nov 2025 10:40:21 GMT

My scores are still recovering when I paid off my pickup back in April. TU and EQ recovered for the post part, but EX is still way down.

Re: Score drop w loan payoff

AndrewF — Fri, 23 Jan 2026 02:13:32 GMT

@TrapLine wrote:
Welcome to the real world of credit. There are many of us that have experienced similar credit point reductions when a mortgage or installment loan is paid off.

In my case it was 22 point reduction on an installment loan. When I paid off the mortgage it was a much larger amount (can not remember how much).

The whole world of credit reminds me of a pinball game!

It rewards owing banks a lot of money. Be proud you own your home and there are no more payments and you don't have to be paranoid about your FICO score when your lease is coming up and you might need a new landlord.

My FICO score is only 700 tops right now and that's EQ. I'd give up 100 points to own a house and not have to ever pass a credit check for somewhere to live again. I'd give up the whole thing for that. They could make my score 350 and that would be a good trade.