topic Paid loan score drop in Understanding FICO® Scoring

Paid loan score drop

Washin17 — Tue, 01 May 2018 14:03:37 GMT

Hello all,

I recently pulled a new experian report and found out that my score decreased by 20 points because I traded in my car in (New car has not been reported yet). I understand the reason byhind the decrease. On one hand it will say that my loan balances are too high so im penalized then it will decrease points for it being paid. My mortgage score dropped almost 40 points. I just dont understand this game. I feel like its a situation I will never win!

Re: Paid loan score drop

Anonymous — Tue, 01 May 2018 14:17:13 GMT

Interesting. So the Experian tool gives you both your Experian FICO 8 and your Experian FICO 2 (the EX mortgage score)... is that right? What is the name of the credit monitoring service you are using?

How much time has elapsed between the two times you pulled your mortgage score? It's useful for us to hear that the EX mortgage score went down -- that has been the received wisdom here on the forums, but good to hear that confirmed. The EQ and TU mortgage scores are supposed to be unaffected by loan amounts.

Was this auto loan the only installment account you had? (No other loans, car leases, financing of furniture at Rooms To Go, etc.)

What was the balance and the original loan amount prior to the payoff?

You mention your mortgage score. Are you thinking about buying a house any time in the next year or two? If so, what's your timeline?

Re: Paid loan score drop

Washin17 — Tue, 01 May 2018 16:02:38 GMT

@Anonymous wrote:
Interesting. So the Experian tool gives you both your Experian FICO 8 and your Experian FICO 2 (the EX mortgage score)... is that right? What is the name of the credit monitoring service you are using?

How much time has elapsed between the two times you pulled your mortgage score? It's useful for us to hear that the EX mortgage score went down -- that has been the received wisdom here on the forums, but good to hear that confirmed. The EQ and TU mortgage scores are supposed to be unaffected by loan amounts.

Was this auto loan the only installment account you had? (No other loans, car leases, financing of furniture at Rooms To Go, etc.)

What was the balance and the original loan amount prior to the payoff?

You mention your mortgage score. Are you thinking about buying a house any time in the next year or two? If so, what's your timeline?

I use the experian tool directly off thier site. It allows me to pull my scores daily which I have been doing to see when the pay off would be reported. Yes the experian tool actually gives me my fico 8, mortage, all the auto and credit card versions.

Only 2 days have lapsed and nothing else has changed. I have student loans on my report but no other loans. My new auto loan has not reported yet.

Re: Paid loan score drop

Anonymous — Tue, 01 May 2018 16:21:30 GMT

A couple of things. One, you stated that the new loan has not yet reported yet. That being said, you aren't being viewed as being at 100% installment loan utilization since it has yet to be factored into the FICO algorithm due to its absence from your report.

Are you certain that the old loan has reported as closed?

If you have active student loans, I wouldn't have anticipated a 20 point score drop on any of your scores, as the auto loan that you just closed wasn't your only installment loan. Sometimes people see small score increases (say around 5 points) when closing an auto loan even if they have another open installment loan and installment loan utilization remains the same. This happened to me about 6 weeks ago when I closed my only open auto loan, leaving just my mortgage. Installment loan utilization didn't change much at all due to the relative size of the mortgage to the auto loan, but I did see score drops of 3-6 points. On the auto score models you'll probably see a negative reason statement to the tune of "no open auto installment loan present" - it sounds like you may be able to check that with the CMS you are using.

Re: Paid loan score drop

Washin17 — Tue, 01 May 2018 17:12:42 GMT

@Anonymous wrote:
A couple of things. One, you stated that the new loan has not yet reported yet. That being said, you aren't being viewed as being at 100% installment loan utilization since it has yet to be factored into the FICO algorithm due to its absence from your report.

Are you certain that the old loan has reported as closed?

If you have active student loans, I wouldn't have anticipated a 20 point score drop on any of your scores, as the auto loan that you just closed wasn't your only installment loan. Sometimes people see small score increases (say around 5 points) when closing an auto loan even if they have another open installment loan and installment loan utilization remains the same. This happened to me about 6 weeks ago when I closed my only open auto loan, leaving just my mortgage. Installment loan utilization didn't change much at all due to the relative size of the mortgage to the auto loan, but I did see score drops of 3-6 points. On the auto score models you'll probably see a negative reason statement to the tune of "no open auto installment loan present" - it sounds like you may be able to check that with the CMS you are using.

Im positive it was closed and it states paid. You are correct that my most recent loan has not been added. I really hope that changes things

Re: Paid loan score drop

Anonymous — Tue, 01 May 2018 18:08:49 GMT

Now that BBS and I know that you have other open loans, can you tell us the balance and original loan amount of each loan, both prior to the payoff and after? Again, this would be the balance and payoff as the appear on your two reports, the ones separated by a few days. You can give it us like this:

BEFORE

Old Auto loan. Balance = ____ Original loan amount = ____

Student loan 1. Balance = ____ Original loan amount = ____

Student loan 2. Balance = ____ Original loan amount = ____

Student loan 3. Balance = ____ Original loan amount = ____

If the AFTER report shows the same SL balances and the Old Auto Loan has a balance of $0 and a status of closed, you can just confirm that for us. You do need two reports though.

And reconfirm that the new loan doesn't appear yet.

PS. I wrote this just as you were posting your replies. So I see that you have confirmed the the new loan does not appear and that it appears closed. Thanks!

We'll still need the BEFORE balances and original loan amounts, as mentioned above. Also, if you can confirm that the old loan now reports a $0 balance as well. If the loan were to be closed but mistakenly report a positive balance that could hurt your score.

Re: Paid loan score drop

Washin17 — Tue, 01 May 2018 17:37:17 GMT

No student loan payments have been made therfore no changes to my loan. The old car loan didnt get reported until 4/30/18. It states paid in full but doesnt say $0. It just a line for the balance dash (---) on the balance part.

Re: Paid loan score drop

Anonymous — Tue, 01 May 2018 18:15:29 GMT

@Washin17 wrote:
No student loan payments have been made therfore no changes to my loan. The old car loan didnt get reported until 4/30/18. It states paid in full but doesnt say $0. It just a line for the balance dash (---) on the balance part.

The old car loan was updated on April 30 -- updated as closed, correct? When did the big score drop occur?

We still need the balances and original loan amounts on all your loans before the payoff -- as they appeared on your report from several days ago. We need this to assess something called "installment utilization." Without knowing that we can't meaningfully assess what might have happened.

Re: Paid loan score drop

Gonzozap — Thu, 03 May 2018 04:50:37 GMT

@Washin17 wrote:
Hello all,

I recently pulled a new experian report and found out that my score decreased by 20 points because I traded in my car in (New car has not been reported yet). I understand the reason byhind the decrease. On one hand it will say that my loan balances are too high so im penalized then it will decrease points for it being paid. My mortgage score dropped almost 40 points. I just dont understand this game. I feel like its a situation I will never win!

I had the same thing happen. I traded my car & bought a new one, and when the old loan finally showed as paid/closed, my score dropped by 30 points. I too understand why, but jeez, what a punishment. Did not get the points back with the new loan cuz the aging changed so much.

Re: Paid loan score drop

Anonymous — Thu, 03 May 2018 13:14:27 GMT

@Gonzozap
I had the same thing happen. I traded my car & bought a new one, and when the old loan finally showed as paid/closed, my score dropped by 30 points. I too understand why, but jeez, what a punishment. Did not get the points back with the new loan cuz the aging changed so much.

The reason you didn't get the points back has far more to do with utilization than it does with aging. Yes, your age of accounts factors may have dropped due to the new loan reporting, but the big difference is that you went from a presumably low balance loan relative to the original balance to a brand new one, at 100% utilization.

Re: Paid loan score drop

Gonzozap — Thu, 03 May 2018 17:12:23 GMT

@Anonymous wrote:
@Gonzozap
I had the same thing happen. I traded my car & bought a new one, and when the old loan finally showed as paid/closed, my score dropped by 30 points. I too understand why, but jeez, what a punishment. Did not get the points back with the new loan cuz the aging changed so much.
The reason you didn't get the points back has far more to do with utilization than it does with aging. Yes, your age of accounts factors may have dropped due to the new loan reporting, but the big difference is that you went from a presumably low balance loan relative to the original balance to a brand new one, at 100% utilization.

Understood. But that can't be the sole factor because I did recoup 21 of the 30 points after about 90 days with no change in my other accounts - other than the fact that my other accounts had aged for 90 more days. Actually, my new loan amount was less than the balance on my old loan. My prior loan was fairly new (only 6 payments made) and I put down a sizeable down payment to drop my monthly payment even lower and not extend the term. I can see that my score would drop a few points, but 30 points just blew me away. I'm thinking it may have had more to do with the fact that I lost my only installment loan when the prior loan was paid. And I gained some points back when the new loan reported.

Re: Paid loan score drop

Gonzozap — Thu, 03 May 2018 17:18:23 GMT

@Gonzozap wrote:
@Anonymous wrote:
@Gonzozap
I had the same thing happen. I traded my car & bought a new one, and when the old loan finally showed as paid/closed, my score dropped by 30 points. I too understand why, but jeez, what a punishment. Did not get the points back with the new loan cuz the aging changed so much.
The reason you didn't get the points back has far more to do with utilization than it does with aging. Yes, your age of accounts factors may have dropped due to the new loan reporting, but the big difference is that you went from a presumably low balance loan relative to the original balance to a brand new one, at 100% utilization.

Understood. But that can't be the sole factor because I did recoup 21 of the 30 points after about 90 days with no change in my other accounts - other than the fact that my other accounts had aged for 90 more days. Actually, my new loan amount was less than the balance on my old loan. My prior loan was fairly new (only 6 payments made) and I put down a sizeable down payment to drop my monthly payment even lower and not extend the term. I can see that my score would drop a few points, but 30 points just blew me away. I'm thinking it may have had more to do with the fact that I lost my only installment loan when the prior loan was paid. And I gained some points back when the new loan reported.
No, the aging didn't change that much. Don't know what I was thinking.