topic Re: FICO's Drop After Car Loan Paid Off! in Understanding FICO® Scoring

FICO's Drop After Car Loan Paid Off!

dragonfly66 — Sat, 07 Nov 2015 14:55:34 GMT

I fully expected there to be decrease of a few points, because I know how that kind of thing works, however, my decreases were rather large. I saw a drop of 14, 20 and 25 points on all 3 scores. That just seems a bit drastic if you ask me. The worst part is, I didn't just pay off my old car loan. I actually traded it in for a new car, so you would think that replacing one car loan with another would mitigate this kind of thing. Then, as if to add insult to injury, EQ knocked me down 3 more points for paying down the balance on my BrandsMart card by 20%. I have a feeling I may be getting "rebucketed", and my scores will probably be better off in the long run, but it hurts when that happens.

Re: FICO's Drop After Car Loan Paid Off!

Anonymous — Sat, 07 Nov 2015 15:02:37 GMT

A low balance installment loan was closed and large one was opened, FICO no likey. It will bounce back quickly though.

Congrats on on a new car!

Re: FICO's Drop After Car Loan Paid Off!

dragonfly66 — Sat, 07 Nov 2015 15:08:54 GMT

@Anonymous wrote:
A low balance installment loan was closed and large one was opened, FICO no likey. It will bounce back quickly though.

Congrats on on a new car!

That rationale makes sense, but the FICO alert simply indicated that the score drops were a result of the old car loan being paid off. I guess the alerts aren't going to give you the full reason for why things are happening. Thanks for the insight.

Re: FICO's Drop After Car Loan Paid Off!

Anonymous — Sat, 07 Nov 2015 15:22:08 GMT

You are lucky...I lost 42 points (806 to 764) when my minivan came off the books.

It was like FICO wanted to remind (punish) me one last time about buying a minivan....

Re: FICO's Drop After Car Loan Paid Off!

Anonymous — Sat, 07 Nov 2015 15:30:40 GMT

I fully believe the alerts make no sense at all. I subscribe to FICO, CCT and CK for that reason.

Yeah, that's my theory, is all.

@ mix Minivan...LOL...my DBF has one, and with every muster of manly pride must show every gadget and button in full prominade of how "awesome" it is. "LOOK AT THIS FEATURE. YOUR CAR CANT DO THAT." It's ok baby. More interesting is during his Guy's night out is having a crew of 40 something Dad's cruising in the minivan bc that's the most economical car for 5 grown men to cruise in.

Re: FICO's Drop After Car Loan Paid Off!

girlinthecity — Sun, 08 Nov 2015 11:58:09 GMT

This thread is very helpful. I too am seeing a big drop as a result of paying off my 2011 car. I couldn't belive I was being dinged for paying off a loan but get a bump up for paying off a credit card. This is really unfair. A payoff is a payoff and should be rewarded. ; (

Re: FICO's Drop After Car Loan Paid Off!

elim — Sun, 08 Nov 2015 12:13:51 GMT

ahhhh, The big Fair Isaac mystery.

I can't see you being a greater risk by lowering your DTI. I can only see you being ready to make a new auto purchase at a higher interest rate due to a score drop from paying off your loan.

Sounds fishy to me and always has.

Re: FICO's Drop After Car Loan Paid Off!

Anonymous — Sun, 08 Nov 2015 23:21:51 GMT

Hey! I love my minivan! It's very utilitarian.

Re: FICO's Drop After Car Loan Paid Off!

Anonymous — Mon, 09 Nov 2015 00:33:15 GMT

I lost 24 points for paying off my auto loan and then another 5 for a new purchase. I am not certain if the wisdom of the forum family or the bottle of wine eased my pain more - just know you are not alone... I wish I would have been trolling here long before that fiscal decision. TBH it was actually a wife decision - makes me feel better to think it was mine. Hope she doesnt make me get a mini van next. I will have to defend how cool it is!

Re: FICO's Drop After Car Loan Paid Off!

Thomas_Thumb — Mon, 09 Nov 2015 00:56:29 GMT

@Anonymous wrote:
I lost 24 points for paying off my auto loan and then another 5 for a new purchase. I am not certain if the wisdom of the forum family or the bottle of wine eased my pain more - just know you are not alone... I wish I would have been trolling here long before that fiscal decision. TBH it was actually a wife decision - makes me feel better to think it was mine. Hope she doesnt make me get a mini van next. I will have to defend how cool it is!

No worries. Fico 8 appears to neeeed to see an open installment loan to be completely satisfied. You have made the model happy again ... and... now you also have a closed loan to boot. Look forward to increased score as you new loan ages and gets paid down.

Oh happy days are here again

P.S. You be the one with the collection and two open auto loans? Maybe not quite so happy.

Re: FICO's Drop After Car Loan Paid Off!

happy0510 — Tue, 10 Nov 2015 00:37:20 GMT

Both DH and myself recently lost points for paying one of ours too. We still have an open installment 1 year into 3. Expecting it to bounce back within 3 months hopefully!

Re: FICO's Drop After Car Loan Paid Off!

Revelate — Tue, 10 Nov 2015 17:11:50 GMT

@elim wrote:
ahhhh, The big Fair Isaac mystery.

I can't see you being a greater risk by lowering your DTI. I can only see you being ready to make a new auto purchase at a higher interest rate due to a score drop from paying off your loan.

Sounds fishy to me and always has.

FICO doesn't calculate on income (it's not even on the credit report FWIW) so DTI is meaningless and a $500 secured loan is the same as a $5M mortgage.

It's not really arguable that people with more outstanding obligations are more likely to default; on the flipside their data demonstrated those that had successfully navigated the installment waters and had a pretty balance remaining on the tradeline, were less likely to default.

It's just data analytics, and FICO doesn't calculate on absolute values unlike what Vantage Score appears to do. That may change in the future but for now it's what we have.

Full gory thread, I'll admit it needs cleaning up but if anyone wants the full details on FICO 8 installment utilization, it's likely worth a read:

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

End of the day do what's good for you financially and don't sweat the FICO stuff. I bought a house and promptly lost 25 points across the board even if financially I'm in a better spot as a result and now if I flake creditors just take a lien on the home... but FICO doesn't look at it that way. Car or mortgage refinances similar, if it saves you non-trivial money or improves cash flow, do it.

Re: FICO's Drop After Car Loan Paid Off!

girlinthecity — Wed, 16 Dec 2015 11:22:46 GMT

Thanks Elim (and everyone really) -

This is nonsensical and insane. This thread is very helpful. 2 out of 3 scores have bounced back but not to the levels they were before.