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Balance decrease causes FICO to drop???

Your FICO® Scores can impact your loan interest rates, terms, approvals and more.
Member

Balance decrease causes FICO to drop???

I’m so tired of this FICO score. We are closing on a house in 3 months and my score continues to drop because I’m paying my bills! First it dropped because we paid of our house and now it dropped another 18 points because of $58 I paid toward a line of credit for furniture! At this rate I’ll be in the 600s soon because of monthly payments that I pay on time!
Message 1 of 6
5 REPLIES 5
Super Contributor

Re: Balance decrease causes FICO to drop???

Your score did not drop because you paid $58 toward a line of credit.  It dropped for a different reason.  I'm assuming you're using MF monitoring that is giving you "alerts" of changes to your credit report and you're assuming that the score provided at the time of the alert has changed (since your last score) because of the alert.  This is not the case.

 

I started a thread about this misleading issue below months ago in hope that MF would make a change.  Clearly they haven't yet.

https://ficoforums.myfico.com/t5/myFICO-Product-Feedback/Alerts-unrelated-to-provided-score-changes/...

Message 2 of 6
Established Contributor

Re: Balance decrease causes FICO to drop???

In a nutshell: It's the Installment loan vs the revolving loan. Installment loans close when you pay the total balance due so you lose that account for scoring purposes, average age of accounts, etc. Revolvers stay open so you never lose the account. Granted, it can be more complex than this but paying off installment loans tend to ding your credit short term. 

Over $192,000 in credit across 12 cards.

FICO ranges from 787 -820 as of 03/12/2018
Message 3 of 6
Super Contributor

Re: Balance decrease causes FICO to drop???

Berk, accounts both open and closed count the same toward age of accounts factors when talking Fico scoring.  The closure of an installment loan can impact the Amounts Owed sector of Fico pie, but not age of accounts.

Message 4 of 6
Established Contributor

Re: Balance decrease causes FICO to drop???


@BrutalBodyShots wrote:

Berk, accounts both open and closed count the same toward age of accounts factors when talking Fico scoring.  The closure of an installment loan can impact the Amounts Owed sector of Fico pie, but not age of accounts.


@BrutalBodyShots, thank you for the clarification.

Over $192,000 in credit across 12 cards.

FICO ranges from 787 -820 as of 03/12/2018
Message 5 of 6
Community Leader
Senior Contributor

Re: Balance decrease causes FICO to drop???

Are these changes happening on your "mortgage" scores, or are you seeing them on FICO 8?

Message 6 of 6