topic Paid Off Car .... Credit Scores DROP 30+ Points! in General Credit Topics

Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Thu, 26 Nov 2020 23:20:48 GMT

So, as the subject heading says I paid off my 6 year car loan 2 years early and my credit scores dropped from 810ish to 785ish! Then a few days ago another ridiculous thing happened ... I paid all my credit card balances off (and when they all reported to the bureaus) my scores dropped another 15+ points! This system is rigged against us! In a matter of a 6 weeks I went from 805-810 to 770s because I got completely out of debt. I now understand the credit logic behind why these drops happened, so I'm not looking for explanations in this post. I have a couple questions though.

First, paying the car off eliminated my only open active installment loan. So that effected my credit mix. But I'm not ready to buy a new car yet. I won't need to for a few years. The only other accounts contributing on my credit mix are 9 credit cards. I also have no hard inquiries in the last 12 months and only a 2 in the last 24 months on experian and 1 on equifax. None on transunion. Also, I have no negative information at all on reports. Question 1: Would getting a 36 month installment personal loan for a few thousand dollars help get me back some (or all) of that huge loss when I paid off the car?

Question 2: If I play the credit game and keep 3-5% on my utilisation ratio, hpw quickly will that 15+ point drop bounce back up after I paid all the cards off?

I ask these questions because I'm looking to buy a house in 2021 or 2022 and want to my scores and reports to be as excellent as possible. I was massive shock to drop so much when paying all debt off.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

AllZero — Thu, 26 Nov 2020 23:29:10 GMT

You received the All Zero points loss for reporting no revolving utilization. To regain the points, have at least 1 bank card report a small balance. Do not use a store or charge card. You will recoup those lost points once you get your updated reports.

If seeking mortgage within a year, it is not recommended to open any new accounts.

Opening a installment loan, e.g. SSL, that is paid down to 8.9% utilization may help your FICO 8 scores. I am unsure if it will help your EX2, TU4, EQ5 scores.

Have you reviewed your EX2, TU4, EQ5 scores? They may or may not have received any points loss due to the closed installment loan. 760 MMS should get you best rates.

Free mortgage scores

EX2 + 3 Bureau scores and reports for $1 at Experian or CreditCheckTotal (part of Experian). Cancel in 7 days or less to avoid the reoccurring charge.

TU4 WyHy quarterly score. Not sure on membership requirement. Maybe hard pull TU?

EQ5 Get a savings account with DCU. Soft pull EQ to be a member. Free monthly score.

You can also obtain your 3 bureau mortgage scores at . Cancel plan after you obtain your scores and reports to avoid re-occurring monthly charge.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

AllZero — Thu, 26 Nov 2020 23:42:20 GMT

I would recommend reading the below from Birdman7
General Scoring Primer and Version 8 Master Thread rev.5.17.20

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Fri, 27 Nov 2020 00:26:45 GMT

@Anonymous wrote:

First, paying the car off eliminated my only open active installment loan. So that effected my credit mix.

That's not correct above. Closing your only loan does not change your credit mix, as credit mix includes both open and closed accounts equally. What was impacted was your installment loan utilization which is part of the Amounts Owed sector of the Fico pie. What was your loan at utilization wise when you paid it off? I know you wrote you paid a 6 year loan off 2 years early, so I'd imagine you were still somewhere in the ballpark of 30%-40% left on the loan, give or take. I find it surprising that you saw such a score hit once the loan reported closed, as you weren't down to single-digit utilization where your scores would have seen the significant boost. Strange, IMO.

As far as how quick your scores would recover from taking on the AZ penalty on your revolvers, the answer is really as long as it takes for one of your bank cards to report a non-zero balance. This could be anything from a day or two to a couple of weeks depending on when your CCs report.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Fri, 27 Nov 2020 03:46:58 GMT

Did your mortgage scores drop or just your FICO 8?

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Fri, 27 Nov 2020 12:02:41 GMT

Hi. Thanks for the response. I left Experian and moved over to MyFico 2 days ago so I don't have the history in the system to show how all of these changed. Here are how my scores appear on MyFico as of today, November 27th, 2020:

FICO8 EQ 753, T 767, EX 762
FICO8 (bank card) EQ 780, T 787, EX 788
FICO9 EQ 778, T 775, EX 787

FICO5 (mortage) EQ 778
FICO4 (mortage) T 768
FICO2 (mortage) EX 782

FICO5 (auto) EQ 784
FICO4 (auto) T 761
FICO2 (auto) EX 756

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Fri, 27 Nov 2020 12:04:29 GMT

WoW! Thanks. There a ton of information in there. That's goin to take a while in take in.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Fri, 27 Nov 2020 12:09:37 GMT

oh wow. I have no idea the exact utilization but you're probably correct in your estimation. I paid off around $4500-5000 on the car.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Fri, 27 Nov 2020 12:12:30 GMT

@Anonymous wrote:
Did your mortgage scores drop or just your FICO 8?

Unfortunitly, I wasn't on MyFico when the scroes dropped so I don't hae the history in the system to go back and check. This whole event made me switch from Experian over to MyFico a couple days. I just posted my current scores, as of today, in a reply to someone else a few minutes ago.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Jannelo — Fri, 27 Nov 2020 13:02:30 GMT

As far as your credit cards, I can give you my experience. Usually, I always have one bank credit card reporting a small balance. Twice this year it ended up where all of my credit cards reported a zero balance at the same time for a few days. Both times I dropped a whopping 20 points on Experian. After one bank credit card reported a small balance around three to five days later, I gained back those 20 points. This was for FICO 8. My mortgage scores dropped temporarily also. I can't remember by how much, though. I posted that info on here at the time.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Fri, 27 Nov 2020 13:02:54 GMT

Thanks for sharing. It's comforting to know that it's seems to be common knowledge and experience, here in the forum, that those AZ point loss will rebound quick.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

AllZero — Fri, 27 Nov 2020 20:18:28 GMT

@Anonymous wrote:
Hi. Thanks for the response. I left Experian and moved over to MyFico 2 days ago so I don't have the history in the system to show how all of these changed. Here are how my scores appear on MyFico as of today, November 27th, 2020:

FICO8 EQ 753, T 767, EX 762
FICO8 (bank card) EQ 780, T 787, EX 788
FICO9 EQ 778, T 775, EX 787

FICO5 (mortage) EQ 778
FICO4 (mortage) T 768
FICO2 (mortage) EX 782

FICO5 (auto) EQ 784
FICO4 (auto) T 761
FICO2 (auto) EX 756

Your EX2, TU4, EQ5 scores look great even at All Zero. Once you report utilization on your revolving account, should regain some lost points. Score wise, you're in excellent shape for mortgage application.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

AllZero — Fri, 27 Nov 2020 20:21:38 GMT

@Anonymous wrote:
WoW! Thanks. There a ton of information in there. That's goin to take a while in take in.

Happy reading. You can always bookmark it and digest it in smaller portions.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Sat, 28 Nov 2020 16:03:29 GMT

Well, I'm sure if this is a complete coincidence or what but .... after reading this about the AZ hit, I thought I'd just go to Home Depot and buy a tool I was wanting anyway on a credit card. The crazy part is ... as I was driving home I got a notification on my phone from MyFico saying my Transunion score increased 15 points back up to 782! That was yesterday. Today, I get the notification from Experian that my score increased 16 points back up to 778! I'm assuming Equifax has increased also but I don't have a way of knowing that until MyFico updates 27 days. At this point, I'm wondering if there's anything I can do to quickly get back the massive 25+ point drop when i paid the car off to get back over 800.

Also, side note ... I was reading BirdMan7's post and saw a couple places that give information about AU (Authorized Users) and the effects of AU's having AZ (All zero) on accounts. It appears that if AU's hae vAZ it can effects the primary's mortage scores also?! I have 1 AU with AZ. He's actualy never used it but he got a 50 point boost up on his credit scores when I added him. He's planning on buying a new SUV very soon. Anyway, I have his AU card. So, I'm going to put a very small amount on it and see if I happen to see a change in my mortage scores. Have you seen this have an effect?

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

krielly — Tue, 01 Dec 2020 18:41:04 GMT

Someone correct me if I'm wrong, but even at zero balances, it appears you are at the top tier of mortgage scores. Increasing your scores beyond letting one bank card report a small balance is unnecessary. You may be overthinking this.........

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Girlzilla88 — Tue, 01 Dec 2020 19:57:18 GMT

750+ is pretty much GOLD for 99% of places haha if the mortgage scores are correct his/her lowest is still above 750 so they are sitting very pretty ;D

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

Anonymous — Tue, 01 Dec 2020 22:41:54 GMT

@Anonymous wrote:
Well, I'm sure if this is a complete coincidence or what but .... after reading this about the AZ hit, I thought I'd just go to Home Depot and buy a tool I was wanting anyway on a credit card. The crazy part is ... as I was driving home I got a notification on my phone from MyFico saying my Transunion score increased 15 points back up to 782!

Yes, it would say it was a coincidence that you received an alert and your score increased shortly after buying a tool at HD.

Re: Paid Off Car .... Credit Scores DROP 30+ Points!

AllZero — Wed, 02 Dec 2020 05:51:14 GMT

@Anonymous wrote:
Well, I'm sure if this is a complete coincidence or what but .... after reading this about the AZ hit, I thought I'd just go to Home Depot and buy a tool I was wanting anyway on a credit card. The crazy part is ... as I was driving home I got a notification on my phone from MyFico saying my Transunion score increased 15 points back up to 782! That was yesterday. Today, I get the notification from Experian that my score increased 16 points back up to 778! I'm assuming Equifax has increased also but I don't have a way of knowing that until MyFico updates 27 days. At this point, I'm wondering if there's anything I can do to quickly get back the massive 25+ point drop when i paid the car off to get back over 800.

Also, side note ... I was reading BirdMan7's post and saw a couple places that give information about AU (Authorized Users) and the effects of AU's having AZ (All zero) on accounts. It appears that if AU's hae vAZ it can effects the primary's mortage scores also?! I have 1 AU with AZ. He's actualy never used it but he got a 50 point boost up on his credit scores when I added him. He's planning on buying a new SUV very soon. Anyway, I have his AU card. So, I'm going to put a very small amount on it and see if I happen to see a change in my mortage scores. Have you seen this have an effect?

@Anonymous To optimize your report for EX2, it is recommended to have true AZEO, no AU card(s) reporting a balance. TU4 and EQ5 should react similarly if it follows the older scoring algorithm. I don't recall reading a report testing it on TU, EQ, since Experian is the only bureau that I know of that gives daily updates.

For optimizing FICO 8s, you want AZEO and one AU card reporting a balance.

Update: FICO2 experiment (is it worth it?)