topic Paid Off Mortgage=Score Drop in Understanding FICO® Scoring

Paid Off Mortgage=Score Drop

cem13 — Fri, 19 May 2023 16:39:01 GMT

I posted previously about my near-retirement journey and how paying down debt affects my score. Previsously I reported a negative CLI from Apple with a FICO 09 Perfect Score of 850.

Well today I received a TU notification that I dropped 5 points for paying off mortgage. EX and EQ reported without a score change.

I have 1 CC reporting, 3 Student Loans (waiting on USSC for their decision), 1 car payment and 1 personal loan.

Total UTIL is under 1%. Both consumer loans are under 50%, student loan is about 90% paid.

FICO 08 scores are: TU=828, EX=821 and EQ=842

It really bothers me to lose points. I just cannot help it. So I think I will have to self medicate with my friend Jack Daniels tonight and see if he has any answers. He has never, I mean never ever, gave me any good advice. Maybe tonight is my lucky night.

Re: Paid Off Mortgage=Score Drop

FireMedic1 — Fri, 19 May 2023 17:02:32 GMT

It all stems from the util % of the total loans that are still open might have went up a few points. Once they're paid down some more the 5 pts will come back and then some.

Re: Paid Off Mortgage=Score Drop

cem13 — Fri, 19 May 2023 17:08:36 GMT

I am not really interested in my FICO score anymore. I do not plan on applying for any loans in the next 5 years or so. Maybe when I retire, I will need to get that High Country Sierra. No respectable retiree would ever be seen driving anything less. I have appearances to maintain, especially for the ladies at the BINGO parlor.

Re: Paid Off Mortgage=Score Drop

Kforce — Fri, 19 May 2023 17:23:11 GMT

@FireMedic1 wrote:
It all stems from the util % of the total loans that are still open might have went up a few points. Once they're paid down some more the 5 pts will come back and then some.

^^^ This

The real loss will be when you pay off the car, personal and student loans.

Re: Paid Off Mortgage=Score Drop

FireMedic1 — Fri, 19 May 2023 20:05:59 GMT

Ok then. Enjoy your retirement! And the hotties at BINGO!

Re: Paid Off Mortgage=Score Drop

Thomas_Thumb — Sat, 20 May 2023 13:09:01 GMT

@cem13 wrote:
I posted previously about my near-retirement journey and how paying down debt affects my score. Previsously I reported a negative CLI from Apple with a FICO 09 Perfect Score of 850.

Well today I received a TU notification that I dropped 5 points for paying off mortgage. EX and EQ reported without a score change.

I have 1 CC reporting, 3 Student Loans (waiting on USSC for their decision), 1 car payment and 1 personal loan.
Total UTIL is under 1%. Both consumer loans are under 50%, student loan is about 90% paid.
FICO 08 scores are: TU=828, EX=821 and EQ=842

It really bothers me to lose points. I just cannot help it.

FICO looks at a few different metrics associated with installment loans for scoring:

1. Aggregate balance to loan ratio of open loans. Paying off a mortgage typically results in an increase B/L ratio. This can cause a score drop.

2. Age of open loans - both average age and oldest open loan. Often a mortgage is the oldest loan so paying it off hurts this metric as well and could cause a score drop.

3. Age of oldest loan on file and average age of all loans. Payoff and closure has no impact on this metric.

4. Credit mix. Having an installment account on file in addition to open revolving accounts increases credit mix. Loans count the same toward mix whether open or closed

5. Presence of installment loan activity. If a profile has only one active open loan and it is paid off, there is no longer any active loan activity. This often causes a score drop. Note: open loans in deferment may not be considered active.

Re: Paid Off Mortgage=Score Drop

SouthJamaica — Mon, 22 May 2023 03:45:27 GMT

@cem13 wrote:
I posted previously about my near-retirement journey and how paying down debt affects my score. Previsously I reported a negative CLI from Apple with a FICO 09 Perfect Score of 850.

Well today I received a TU notification that I dropped 5 points for paying off mortgage. EX and EQ reported without a score change.

I have 1 CC reporting, 3 Student Loans (waiting on USSC for their decision), 1 car payment and 1 personal loan.
Total UTIL is under 1%. Both consumer loans are under 50%, student loan is about 90% paid.
FICO 08 scores are: TU=828, EX=821 and EQ=842

It really bothers me to lose points. I just cannot help it. So I think I will have to self medicate with my friend Jack Daniels tonight and see if he has any answers. He has never, I mean never ever, gave me any good advice. Maybe tonight is my lucky night.

I'm skeptical that paying off the mortgage is the cause of the point loss.