TRADE IN - Score Effects

[Anonymous]

So my car was giving me problems so I traded it in and bought something else. I rolled in the negative equity into the new loan so the old loan would be paid off. 

For some reason I thought I'd get a score boost, but instead my score decreased at most of 20 points on Experian. Dropped an additional 5-8 points on EQ & TU. 

The good thing about it, is that when it got paid off I see that the last late payment was removed & updated to OK when I had been fighting for it's removal for a long time. I paid 5 days before 30 days was up, but the "payment processor" did not process in time & gave the bank the money on the 30th day. SMH..... Although it didn't increase my scores any, it at least shows that I have made on time payments over my accounts for 18 months now. Which in my eyes is awesome considering the sheer amount of cleaning up I had to do. 

The new auto loan is reporting, however it did not gain nor drop any points. I look forward to gardening & playing with utilization to get my scores back up. Past billing period my utiilzation was at 9%, I will increase to 20% just to see what happens. 

[Anonymous]

A brand-new installment loan will generate a "high balance" flag, and on many credit files this causes a temporary dip in FICO scores.

Assuming all else in your file has stayed the same as it was immediatley pre-loan, this is likely the cause of your score dip.

Once you've made several payments on the new loan, thereby reducing its balance below the mark for "high balance," you will get those poitns back.  And probably see a side benefit from the loss of the late-payment reporting as well.  It's better, credit-wise, to have an installment loan (to get those "mix" points), but when they are brand new they can cause a slight loss of score for a little while.