topic explanation of score decrease in Understanding FICO® Scoring

explanation of score decrease

Anonymous — Wed, 13 Nov 2013 00:30:59 GMT

Can someone explain why my score has decreased. I recently paid off a 16000.00 personal loan last month. Then I transferred a high interest balance from several accounts to another card offering 0% for 18 months My total debt has decreased by 16000 dollars and I just moved other debt around to pay it off faster. My credit score was 799 and has decreased to 788. I don't understand the logic.

Re: explanation of score decrease

smallfry — Wed, 13 Nov 2013 01:31:38 GMT

The accounts you transferred the balance from might still be reporting the balances. Beyond that I could not speculate.

Re: explanation of score decrease

Anonymous — Wed, 13 Nov 2013 02:07:02 GMT

I had the same thing happen. I refinanced my car and once the new lender (my credit union) paid off the original loan, my score took a major nose dive. The way I understand it, along with the "dings" from having my credit ran through the refinancing process, the major issue is that I no longer have a long-term, good standing account showing anymore. That's where the major hit took place. Your score increases over time as you show a routine to make monthly payments on time. Once that stops (either paid off or by refinance) then it actually counts against you. Of course, I think it also matters if you don't have a few other open accounts (in good standing, of course)to make up for it. In my case, I only had a mortgage and an auto financed... no credit or store cards... and my debt to income ratio is higher. It all works together.

Sadly, I remember a time when paying off a loan was a good thing and would actually boost your score... not decrease it.

Re: explanation of score decrease

Anonymous — Wed, 13 Nov 2013 02:18:49 GMT

@Anonymous wrote:
I had the same thing happen. I refinanced my car and once the new lender (my credit union) paid off the original loan, my score took a major nose dive. The way I understand it, along with the "dings" from having my credit ran through the refinancing process, the major issue is that I no longer have a long-term, good standing account showing anymore. That's where the major hit took place. Your score increases over time as you show a routine to make monthly payments on time. Once that stops (either paid off or by refinance) then it actually counts against you. Of course, I think it also matters if you don't have a few other open accounts (in good standing, of course)to make up for it. In my case, I only had a mortgage and an auto financed... no credit or store cards... and my debt to income ratio is higher. It all works together.

Sadly, I remember a time when paying off a loan was a good thing and would actually boost your score... not decrease it.

Even closed and paid, that account will always continue to count towards your AAoA. It will continue to count up to 10 years (+/-) until it is removed from your CR.