topic Re: Paying off my car loan ruined my credit. Score dropped 70+ points. in Understanding FICO® Scoring

Paying off my car loan ruined my credit. Score dropped 70+ points.

Anonymous — Thu, 20 Jun 2013 09:13:17 GMT

My credit scores before paying off the loan were 685/673/680. Now it's at 605/611/603. I'm actually sick.

I've just been set back years. What's the point of trying to cultivate good credit when you're punished like this?

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Anonymous — Thu, 20 Jun 2013 09:43:07 GMT

@Anonymous wrote:
My credit scores before paying off the loan were 685/673/680. Now it's at 605/611/603. I'm actually sick.

I've just been set back years. What's the point of trying to cultivate good credit when you're punished like this?

This doesn't sound right. Are these FICO scores? Have you compared your reports before paying the loan and after?

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

lg8302ch — Thu, 20 Jun 2013 10:01:25 GMT

This could be the behavior of FAKO's. I do not have any loans and only credit cards therefore my FAKO scores are about 40-50 points lower than the real FICO's. Hope you looked at FAKO scores then I would say... relax and look at the real FICO scores. You might be surprised...Good luck!

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Anonymous — Thu, 20 Jun 2013 18:27:31 GMT

Paying off an installment loan should have minimal impact on your FICO score in either direction. If it was your only installment loan, onces paid and closed you no longer have a mix of credit.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

FICOWolf — Thu, 07 Nov 2013 22:04:58 GMT

I paid off my Installment loan and my FICO score dropped 16 points from 723 to 707. I still have a very good mix credit with other installment loans (student loans). The only factor that must have changed my score is that of a Closed Account. Such a Bummer!

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

kkapdolee — Fri, 08 Nov 2013 16:03:55 GMT

I've read similar stories in multiple places. I've posted here once how I'm purposely paying off a very small loan (<2k) slowly because I do not wish my score to drop and people started going crazy about how much wrong information is in this forum and how dumb it is to think the score should drop if loan is paid off.

To those people who swear that the score WILL NOT drop, have you guys actually paid off a loan before and seen your own scores unchanged or go up or are you guys just basing your "opinions" on what you "think" you know about FICO scores because I've seen a lot of people say their score dropped after a loan payoff but haven't seen anyone say the other way around. I'm about to payoff my small loan listening to your "advice" and I don't want to be another victim of misinformation.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

kkapdolee — Fri, 08 Nov 2013 15:58:16 GMT

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Anonymous — Fri, 08 Nov 2013 16:35:50 GMT

@kkapdolee wrote:
I've read similar stories in multiple places. I've posted here once how I'm purposely paying off a very small loan (<2k) slowly because I do not wish my score to drop and people started going crazy about how much wrong information is in this forum and how dumb it is to think the score should drop if loan is paid off.

To those people who swear that the score WILL NOT drop, have you guys actually paid off a loan before and seen your own scores unchanged or go up or are you guys just basing your "opinions" on what you "think" you know about FICO scores because I've seen a lot of people say their score dropped after a loan payoff but haven't seen anyone say the other way around. I'm about to payoff my small loan listening to your "advice" and I don't want to be another victim of misinformation.

I have seen some with drops, some increases, and some no score changes at all. As with any FICO situation, anything is possible.

I don't think anyone would swear the score will not drop, no one knows for absolute sure. Because an installment counts little toward your score in the first place, there should be little impact, one way or the other. Everyones profile is different and is affected differently by different scenarios.

IMO, it isn't misinformation, it is what happened to them and how an installment is scored in the first place.

Personally, I have paid off several installments and my score did not change at all.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Kratos-TM — Fri, 08 Nov 2013 22:14:05 GMT

I had 7 installments reporting a year ago. Everytime I paid one off, I gained 3 points. Now I'm down to 2 installments. I know for a fact that if I pay them off, the opposite will occur and I'd lose points. It all boils down to having that right number that matches your credit profile. Nothing more, nothing less....

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

kkapdolee — Fri, 08 Nov 2013 22:19:19 GMT

@Kratos-TM wrote:
I had 7 installments reporting a year ago. Everytime I paid one off, I gained 3 points. Now I'm down to 2 installments. I know for a fact that if I pay them off, the opposite will occur and I'd lose points. It all boils down to having that right number that matches your credit profile. Nothing more, nothing less....

How do you know "for a fact" that your score will go down?

Does the 3 point gain each time apply to the three FICO scores in your signature and each of them gained precisely 3 points?

This FICO thing is so confusing...

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

kkapdolee — Fri, 08 Nov 2013 22:23:48 GMT

@Anonymous wrote:
@kkapdolee wrote:
I've read similar stories in multiple places. I've posted here once how I'm purposely paying off a very small loan (<2k) slowly because I do not wish my score to drop and people started going crazy about how much wrong information is in this forum and how dumb it is to think the score should drop if loan is paid off.

To those people who swear that the score WILL NOT drop, have you guys actually paid off a loan before and seen your own scores unchanged or go up or are you guys just basing your "opinions" on what you "think" you know about FICO scores because I've seen a lot of people say their score dropped after a loan payoff but haven't seen anyone say the other way around. I'm about to payoff my small loan listening to your "advice" and I don't want to be another victim of misinformation.
I have seen some with drops, some increases, and some no score changes at all. As with any FICO situation, anything is possible.

I don't think anyone would swear the score will not drop, no one knows for absolute sure. Because an installment counts little toward your score in the first place, there should be little impact, one way or the other. Everyones profile is different and is affected differently by different scenarios.

IMO, it isn't misinformation, it is what happened to them and how an installment is scored in the first place.

Personally, I have paid off several installments and my score did not change at all.

Thanks for the reply. However, someone definitely has expressed anger on this forum saying that paying off a loan will not drop one's score. I don't know if that person was talking from personal experience but it certainly didn't sound like it.

I have seen 70+ drops but not 70+ gains for paying off a loan. Have you?

According to MyFICO, a mix of credit accounts for 10% of the score. That is 55 points on a 300-850 scale.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Anonymous — Fri, 08 Nov 2013 22:44:36 GMT

@kkapdolee wrote:
@Anonymous wrote:
@kkapdolee wrote:
I've read similar stories in multiple places. I've posted here once how I'm purposely paying off a very small loan (<2k) slowly because I do not wish my score to drop and people started going crazy about how much wrong information is in this forum and how dumb it is to think the score should drop if loan is paid off.

To those people who swear that the score WILL NOT drop, have you guys actually paid off a loan before and seen your own scores unchanged or go up or are you guys just basing your "opinions" on what you "think" you know about FICO scores because I've seen a lot of people say their score dropped after a loan payoff but haven't seen anyone say the other way around. I'm about to payoff my small loan listening to your "advice" and I don't want to be another victim of misinformation.
I have seen some with drops, some increases, and some no score changes at all. As with any FICO situation, anything is possible.

I don't think anyone would swear the score will not drop, no one knows for absolute sure. Because an installment counts little toward your score in the first place, there should be little impact, one way or the other. Everyones profile is different and is affected differently by different scenarios.

IMO, it isn't misinformation, it is what happened to them and how an installment is scored in the first place.

Personally, I have paid off several installments and my score did not change at all.
Thanks for the reply. However, someone definitely has expressed anger on this forum saying that paying off a loan will not drop one's score. I don't know if that person was talking from personal experience but it certainly didn't sound like it.

I have seen 70+ drops but not 70+ gains for paying off a loan. Have you?

According to MyFICO, a mix of credit accounts for 10% of the score. That is 55 points on a 300-850 scale.

I have never personally seen a 70 point drop for paying off a loan. IME that is way too excessive. As I said, my score stayed the same and I have paid of probably 10 - 15.

Even a closed installment is considered in the mix of credit.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

kkapdolee — Fri, 08 Nov 2013 22:49:07 GMT

@Anonymous wrote:
@kkapdolee wrote:
@Anonymous wrote:
@kkapdolee wrote:
I've read similar stories in multiple places. I've posted here once how I'm purposely paying off a very small loan (<2k) slowly because I do not wish my score to drop and people started going crazy about how much wrong information is in this forum and how dumb it is to think the score should drop if loan is paid off.

To those people who swear that the score WILL NOT drop, have you guys actually paid off a loan before and seen your own scores unchanged or go up or are you guys just basing your "opinions" on what you "think" you know about FICO scores because I've seen a lot of people say their score dropped after a loan payoff but haven't seen anyone say the other way around. I'm about to payoff my small loan listening to your "advice" and I don't want to be another victim of misinformation.
I have seen some with drops, some increases, and some no score changes at all. As with any FICO situation, anything is possible.

I don't think anyone would swear the score will not drop, no one knows for absolute sure. Because an installment counts little toward your score in the first place, there should be little impact, one way or the other. Everyones profile is different and is affected differently by different scenarios.

IMO, it isn't misinformation, it is what happened to them and how an installment is scored in the first place.

Personally, I have paid off several installments and my score did not change at all.
Thanks for the reply. However, someone definitely has expressed anger on this forum saying that paying off a loan will not drop one's score. I don't know if that person was talking from personal experience but it certainly didn't sound like it.

I have seen 70+ drops but not 70+ gains for paying off a loan. Have you?

According to MyFICO, a mix of credit accounts for 10% of the score. That is 55 points on a 300-850 scale.
I have never personally seen a 70 point drop for paying off a loan. IME that is way too excessive. As I said, my score stayed the same and I have paid of probably 10 - 15.

Even a closed installment is considered in the mix of credit.

Ok. I believe you. I haven't really seen 70 point drops in person either, just what people say here.

I am paying off one of my loans within the next 4 months. I will be monitoring my FICO 04 Classic score (EQ from DCU) and FICO 08 Classic score (TU from Walmart). I will let you know how that affects my score.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Anonymous — Fri, 08 Nov 2013 23:24:24 GMT

@kkapdolee wrote:
@Anonymous wrote:
@kkapdolee wrote:
@Anonymous wrote:
@kkapdolee wrote:
I've read similar stories in multiple places. I've posted here once how I'm purposely paying off a very small loan (<2k) slowly because I do not wish my score to drop and people started going crazy about how much wrong information is in this forum and how dumb it is to think the score should drop if loan is paid off.

To those people who swear that the score WILL NOT drop, have you guys actually paid off a loan before and seen your own scores unchanged or go up or are you guys just basing your "opinions" on what you "think" you know about FICO scores because I've seen a lot of people say their score dropped after a loan payoff but haven't seen anyone say the other way around. I'm about to payoff my small loan listening to your "advice" and I don't want to be another victim of misinformation.
I have seen some with drops, some increases, and some no score changes at all. As with any FICO situation, anything is possible.

I don't think anyone would swear the score will not drop, no one knows for absolute sure. Because an installment counts little toward your score in the first place, there should be little impact, one way or the other. Everyones profile is different and is affected differently by different scenarios.

IMO, it isn't misinformation, it is what happened to them and how an installment is scored in the first place.

Personally, I have paid off several installments and my score did not change at all.
Thanks for the reply. However, someone definitely has expressed anger on this forum saying that paying off a loan will not drop one's score. I don't know if that person was talking from personal experience but it certainly didn't sound like it.

I have seen 70+ drops but not 70+ gains for paying off a loan. Have you?

According to MyFICO, a mix of credit accounts for 10% of the score. That is 55 points on a 300-850 scale.
I have never personally seen a 70 point drop for paying off a loan. IME that is way too excessive. As I said, my score stayed the same and I have paid of probably 10 - 15.

Even a closed installment is considered in the mix of credit.
Ok. I believe you. I haven't really seen 70 point drops in person either, just what people say here.

I am paying off one of my loans within the next 4 months. I will be monitoring my FICO 04 Classic score (EQ from DCU) and FICO 08 Classic score (TU from Walmart). I will let you know how that affects my score.

I am curious so please do let me know.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Kratos-TM — Fri, 08 Nov 2013 23:29:54 GMT

@kkapdolee wrote:
@Kratos-TM wrote:
I had 7 installments reporting a year ago. Everytime I paid one off, I gained 3 points. Now I'm down to 2 installments. I know for a fact that if I pay them off, the opposite will occur and I'd lose points. It all boils down to having that right number that matches your credit profile. Nothing more, nothing less....
How do you know "for a fact" that your score will go down?
Does the 3 point gain each time apply to the three FICO scores in your signature and each of them gained precisely 3 points?

This FICO thing is so confusing...

I just do. I know none of us have any answers for that complex crazy algorythm, so saying "for a fact" is stretched. But I just know.

And yes those 3 points increments apply to my 3 scores and each gained 3 points. But this is definitely a YMMV situation.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

bradlin — Sun, 10 Nov 2013 09:16:11 GMT

Let's face it, this has happened to many of us. My score dropped whenI paid off my car loan about 30 points.

A blogger writes about how his score was highest when he was barely making ends meet and now that he can afford to easily pay off his home in 5 years his score is lower. He did some "stupid" things like close a $20k credit line etc.

People like us who follow this nonsense know it was a "stupid" thing to do. But really what does this number tell us about anybody's ability to repay if the score goes down when you pay off lines and cancel lines you don't need? What is this score really trying to predict?

A "credit expert" says that it does not predict the ability to pay but rather the "willingness" to pay. That sounds about right. The willingness to pay every extra dollar to the banks and make them have bigger profits. It really is a profitability score. And we sit here figuring out how to game it the best we can. Does everyone need to learn this game to have good credit? Some thngs go completely against the common sense principles of sound financial management.

http://bucks.blogs.nytimes.com/2011/08/24/are-credit-scores-cow-dung/

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Anonymous — Wed, 13 Nov 2013 02:14:01 GMT

I just refinanced. This happened to me as well. Not a 70 point decrease, mind you, but mine did go down 16 points. I refinanced so I could understand a ding from my credit union running my credit in order to do the refinance, but 16 points just seems crazy to me.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

kkapdolee — Wed, 13 Nov 2013 02:21:02 GMT

hmm.. rethinking paying off my small loan now..

It's small enough that I could pay off right this minute if I wanted too..

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

_jb_ — Sat, 16 Nov 2013 17:57:32 GMT

I have three student loans in deferment until Jan 2015. The balances are $0.01, $0.02, and $3,500. The $3,500 one is subsidized, and the other two were unsubsidized. I paid them down to basically nothing but left them open in order to show multiple installment accounts for a little while longer, etc. They are my only open installment loans right now, and I don't expect to add any others any time soon. I am also curious what paying them all off will do to my score (have been paying them down in chunks and looking for a score change for a few months - check the GC threads), and will probably pay them all off in the spring/summer. When I do, I will be sure to create a thread showing any changes.

Re: Paying off my car loan ruined my credit. Score dropped 70+ points.

Anonymous — Wed, 09 Jul 2014 13:58:45 GMT

My score droppped 10 points for paying off my car loan of 9G. I refinanced to pay for a boat though, waiting to see what the new loan does.