FICO Score Impact when Car Loan is Paid Off and new Car Loan is Added

[techygal]

I really don't understand FICO scoring when it comes to Auto Loans.  I paid off my credit cards earlier this year and got down to 0% utilization.  Prior to the payoffs my Credit Scores were Experian (777) Transunion (757) Equifax (773).  After the payoffs my credit scores increased to Experian (829) Transunion (827) Equifax (824).  In May I went on a mini app spree.  Impacts to scores were Experian (-20) Transunion (0) Equifax (-7) and I was expecting that so no biggie.  However when I got an offer from the dealer on my Audi lease, I turned in my Q5 and got a new Q5 with a reduced monthly payment  (saving $115.00 a month) and the car got paid off by the dealer, my scores dropped to Experian (23) Transunion (21) and Equifax (20).  However when the new loan was added the score doesn't increase.  Why?  If it's a negative impact when you pay off the loan, I would think that your scores should increase when a car loan is added back.  I know my score will increase in time but this really doesn't make any sense to me.

[Anonymous]

FICOland doesn't have logical rules on everything...

In this case, the removal/payoff of the older loan caused a decrease.  Normal, when removing an installment loan, especially if you don't have any others in your file.

This was followed by opening a new installment loan (the new car). This loan naturally has a much, much higher balance and has no payment history, yet.  So it can have a negative impact as well, in some files.  The improvement for having an installment loan in your credit mix is overcome by the "hits" for it having a high balance and no history.

Once you've paid on it a couple of months and the rest of your file remains clean, your scores will bounce back.  (The shock will wear off and the waves will die down, causing your score to equalize back where it was before).

[techygal]

Thanks for your response.  Makes sense.  It was nice being in the 800 club while it lasted! lol.  I know my scores will bounce back again.

[Anonymous]

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@techygal wrote:

Thanks for your response.  Makes sense.  It was nice being in the 800 club while it lasted! lol.  I know my scores will bounce back again.

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It will bounce back up. It's mostly because ur other loan is paid off but new loan is high than old loan remaining balance. Pay a few months and as the new low balance decrease ur score will increase