topic Re: Paid Off My Auto Loan And Score is DOWN 19 points. . . in General Credit Topics

Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Mon, 10 Dec 2007 23:55:29 GMT

which sucks because I worked so hard to get my score up but I would rather be without the high interest debt accumulating every month :-(

Message Edited by dooodooo on 12-10-2007 03:55 PM

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 00:12:41 GMT

Same thang just happened to me. Only about 7pts though.

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

ariesdreamer — Tue, 11 Dec 2007 00:13:20 GMT

dooodooo wrote:
which sucks because I worked so hard to get my score up but I would rather be without the high interest debt accumulating every month :-(

Message Edited by dooodooo on 12-10-2007 03:55 PM

The exact thing happened to me when I paid off my auto loan last year. Maybe it was the account being closed and not opened anymore...? Anyhow, at least that car loan is paid off. It feels super good, doesn't it?!

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 16:46:48 GMT

Hello, and welcome.

This is a common occurance.....paying of a car loan and the score decreases. I'm in the same boat.

I paid off 2 car loans last August and my scores plunged 35 points.

The reason that it occurs is that you are decreasing your credit mix(various types of credit instruments(revolving, installment, mortgage, HELOC, etc)

Your credit mix accounts for 10% of your FICO scores. Under "Credit Education" look at the dreaded pie chart of death, as hauling puts it. It will explain a lot.

http://www.myfico.com/images/CreditEducation/ce_scorebreakdown.png

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 17:00:44 GMT

That drives me crazy, no pun intented.

Your credit score is supposed to be a measure of your credit worthiness. You take out a loan, which is a line of credit, you pay it back, showing good credit worthiness. Showing you can take on a line of credit and are dependable. If anything it show go up.

But NOOOOOOOOOOOOO let's punish them because FICO lkes everyone to be in debt to the creditor's. Yeah I said it, they are in shrill with the lending institutions.

Think about it, what are some of the common advice tips they give you to improve you score? Open new credit accounts or open up some more installment accounts. INSANE , I's tell ya.

but anywho, to blankety blank with FICO. You've paid off that car loan, and now the car is your's and no more payments and that debt is gone and you can use that money towards other things.. THAT'S A GREAT FEELING despite what FICO AND Credit Bur's. think

Good Job

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 17:16:35 GMT

Totally agree Boswd! It IS a good feeling to have clear title to a car.

When I paid off my car loans, I considered that to be giving myself a $600 per month raise. And the FICO scores shrink in importance.....until I apply for a cc! LOL

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 17:16:52 GMT

I wonder if it's best to just pay off everything, except for the final $100? The interest wouldn't be signifcant (even at 12%, that's only a buck a month) and it'll keep it on the credit report.

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 17:22:29 GMT

If it were me, I'd keep the loan in place, consistently making those payments, unless you just want to rid yourself of the payment. Right now, it's only helping your score.

A judgment call only you can make.

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

fishbjc — Tue, 11 Dec 2007 17:29:37 GMT

Good to know and it STINKS! I planned on paying mine off by middle of '07...but I may pay it down now and keep a little bit open while my score increases. Another reason why this forum is so helpful.

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 18:30:01 GMT

As Slyvia has said it is a judgment call on your part on whether or not you want to pay off your auto loan or not.

IMHO I feel the less debt and obligations to creditor's trump the FICO score everytime. For one, you will now have more money in your pocket that you haven't had for years, that you can use what ever way like ( start a vacation fund, increase your savings, get caught up on other debt etc..)

As it does seem when paying off an installment loan it does affect your score. BUT it also is a POSTIVE, under a manual review from other lenders. It is really important having a PAID installment loan. especially if paid on time in your credit history. This shows the lender you can take out a loan and pay them back with no trouble.

You also have to remember that your credit score is at it's most important when looking for a mortgage, auto loan, or other types of installment loans. Yes, I know that your credit score is looked at in other different situations but the most important times are when looking for an installment loan or some form, but lets be honest, getting a high enough score to qualify for the latest Amex card shouldn't really be on your higest priority list, And with that your past paid off loans are going to be viewed very positively.

So unless you are looking to get a line of credit, the temporary hit you will take is rather meaningless.

So I say if you can pay off your auto loan early and there are no early payment penelties than I say go ahead and pay it off and enjoy the savings you are about to receive, especially the future savings your are going to get by not paying interest on it.

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 18:48:14 GMT

Does the same thing hold true for student loans?

I am thinking about furthering my studies, but planning to pay off some old student loans, and applying for new ones. Would paying the old ones off make my scores go down, and perhaps end up getting higher rate new ones?

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 19:07:07 GMT

you won't or least you shouldn't. Ummm word to wise, score drop or not DO NOT MESS AROUND WITH STUDENT LOANS!!!!!!!!!!!!!!!!!!!!!!!!!!!!! If you can pay them back even early then do so.

These are the worst to mess around with, BELIEVE ME!!!!!!!!!

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 20:35:36 GMT

ahh, another person seeing the light. Search for my only thread on here, it's like 20 pages long. Basically I paid off all my debt and my score dropped. The FICO model doesn't act well to people paying off debt. The whole system is a scam to keep you in debt. I broke free of the system and got debt free. When I paid off my student loans my FICO went nuts. Up 20, down 30, up 50, all over the place. I'm down a few pts last month. Most times it rebounds but I don't know the long term shake out and here is the best part, I DON'T CARE ABOUT MY FICO! No one does any more. FICO is a dinosaur that needs to die.

High FICOS are for broke people... I got plenty of money and no need for a FICO, my credit union doesn't care what it is, they know it's a scam. They look in my account and know my worth..

There is a trend in this country, people are waking up and realizing that we are being suckered and more and more you see people finally saying enough and cutting up cards and getting out of debt. I make more money than my friends, I have no debt, yet they have higher scores but debt up to their eye balls.. Yea that makes sense.

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Tue, 11 Dec 2007 21:25:11 GMT

kpaul212 wrote:
Does the same thing hold true for student loans?

I am thinking about furthering my studies, but planning to pay off some old student loans, and applying for new ones. Would paying the old ones off make my scores go down, and perhaps end up getting higher rate new ones?

DooDoo - Has anything remotley changed in your credit report during the time of the paid off auto loan? Anything, new inquires, any new charge off's, 19 points for paying of an installment loan seems to be very excessive.

Did your credit card utilization go up during this time?

Message Edited by Boswd on 12-11-2007 01:25 PM

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Wed, 12 Dec 2007 17:44:13 GMT

Good for you. I want to get to that point when I don't owe anything anymore and be debt free. At that point I'll be saying the same thing I don't care about FICO scores anymore. For now...sigh

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Thu, 13 Dec 2007 22:34:12 GMT

Well, I received a score watch alert and it indicated that this was the only change to my credit report that day. My credit card utility is at about 90% but it's been like that for the past 3 months with no changes to my score so I think it has to be the paid off balance. Do you think if Capital One reported the past due balance as $0 instead of "not on record" - it would look better? Sheesh - I've been paying triple my car payments since July/August to get rid of this freaking car note and the ridiculous car insurance (almost as much as the car note) b/c I live in DC. The score situation sucks but am still glad to have that out of my hair. Below is what is being reported now - the ONLY thing that was different before was a balance of $916. I would love any advice. Thanks.

CAPITAL ONE AUTO FINANCE (XXXXXXXXXXXXXXXX)

Account opened: 8/2002
Balance: $0

Past due: Not on Record

Status: Pays account as agreed

Last activity: 11/1/2007

Description: Auto loan -Closed or Paid Account/Zero Balance

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Wed, 02 Jan 2008 17:26:59 GMT

My GF just paid off her car loan in December (she had a little under $9K remaining). The new balance of $0 just posted on Experian today. Granted, it's FAKO, but according to PrivacyMatters her EX score just went up 14 points. Too cheap to see if the FICO had the same effect

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Wed, 02 Jan 2008 18:22:48 GMT

don't worry about the small drop in fico for paying off a loan--congrats on that! I know it's easy to get in the mindset that everything to increase fico is good, at no matter what cost, and everything that decreases it is bad. You need to think outside both boxes to succeed IMHO. In the debt-free--cough, Dave RAmsey--cough camp you have people who hate all debt. Then in the Fico camp you have people who appear to seem to think you need to be in debt to have a fico score. Both of these mindsets are flawed.

Fact #1: You do not need to be in debt to have a high Fico.
Fact #2: Being Debt Free should be everyone's goal.

Last I checked, "mix of credit" makes up only 10% of your score, so if you paid off all installment loans, and were good in every other way, you could still have a score of ~765. But this is almost never the case--you still get points for paid-off good installment loans, and bad ones fall off after 7 years, so you will still get points.
I know people with over 800 scores who have no installment debt--just 2 or 3 credit cards.

You can build fico just by charging small amounts (less then 10%) to credit cards, and paying them off in full every month after they report to the CRA's. It's that easy. Pay off you installments, use your credit cards for small purchases and you're set!

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Wed, 02 Jan 2008 20:28:32 GMT

another thing to think about is that if you are ay 90% UT then if you use the money from the old car payment and pay down those other accounts you will see an increase of far more than 19 pts. i'm sure this drop is only temporary and you will quickly recover.

Re: Paid Off My Auto Loan And Score is DOWN 19 points. . .

Anonymous — Thu, 03 Jan 2008 18:37:33 GMT

Took me 3 years, but it was worth it.. I control my life now, not Fico or my CC company. My friends made fun of me, now they are asking me how I did it... Funny how things work out in life. I even have some FICO score nuts now telling me they no longer care, they are finally seeing the light. The anti credit revolution has begun in this country.