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Confused

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New Member

Confused

I've had two student loans for 20 years just recently paid off. My scores dropped 15 points and it indicates account closed and apparently the length of my credit history was impacted. The loans still appear in my reports. Anyone know why the scores would drop when paid off and history length shorten?
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Valued Contributor

Re: Confused

Do you have an auto or home loan? If these were your only installment loans that could explain the drop.

Ch 7 Discharge May 2015
Discover/Target/NFCU CLOC/NFCU More Rewards Amex/NFCU Platinum/PenFed Power Cash Rewards/PenFed Pathfinder Visa/Citi Costco Visa/CapitalOne SavorOne/Apple Card - $132,100 total revolving
5% down Conventional Mortgage @ 3.25%
Message 2 of 10
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New Member

Re: Confused

Didn't think about that, truck is paid off and trying to get a mortgage. This score drop didn't help. Thanks for your reply.
Message 3 of 10
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Valued Contributor

Re: Confused

If you're dealing with a broker, they might appreciate the fact that your loans are paid off and your DTI is down even though it resulted in the score shift.

Ch 7 Discharge May 2015
Discover/Target/NFCU CLOC/NFCU More Rewards Amex/NFCU Platinum/PenFed Power Cash Rewards/PenFed Pathfinder Visa/Citi Costco Visa/CapitalOne SavorOne/Apple Card - $132,100 total revolving
5% down Conventional Mortgage @ 3.25%
Message 4 of 10
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Re: Confused

Even though it's paid do you know why I lose the history so to speak? I've had the account for 20 years. I'd figure it would still be beneficial with length of credit history even paid off.
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Super Contributor

Re: Confused


@dwightwalker24 wrote:
I've had two student loans for 20 years just recently paid off. My scores dropped 15 points and it indicates account closed and apparently the length of my credit history was impacted. The loans still appear in my reports. Anyone know why the scores would drop when paid off and history length shorten?

The FICO 8 algorithm penalizes you for having no open installment loans.

 

But it is not clear that the Auto and Mortgage scores react in a similar way. So you should pull your full 3B report to see what the reality is for your scoring.


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Message 6 of 10
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New Member

Re: Confused

That's good to know, I'll do that thanks!
Message 7 of 10
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Established Contributor

Re: Confused

When I applied for my mortgage my fico8 scores were a good bit lower than my mortgage scores (15-20pts). I had no open installment loans at the time only 3 closed student loans. Not sure if this is any indication mortgage scores are penalized less for not having any open installment loans but it seems plausible. I'm kinda curious how your scores compare. I have a hunch length of history is really important for mortgages scores (makes sense 30yrs is a long time), you having 20yr old loan history may be the biggest help. As SouthJamaica suggested pull your 3B report and see where you stand.
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Re: Confused

Thanks!
Message 9 of 10
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Super Contributor

Re: Confused


@dwightwalker24 wrote:
I've had two student loans for 20 years just recently paid off. My scores dropped 15 points and it indicates account closed and apparently the length of my credit history was impacted. The loans still appear in my reports. Anyone know why the scores would drop when paid off and history length shorten?

What credit monitoring tool were you using that indicated that your length of credit history was shortened?  Was it Credit Karma?  Karma's front end interface (its "summary" page) ignores closed accounts in its age related factors, but no FICO model does this.  From FICO's perspective, your age of oldest account has not changed -- it's still your student loan (if that was your oldest account when it was open).  Your average age of accounts (AAoA) has not changed either.

 

If you were using Karma, then the age information you got was wrong, and the scores you describe were also worthless, since they were not FICO scores.

 

If you are on a budget and want a cheaper alternative to pulling a $60 myFICO report, you could sign up for the $1 trial at Credit Check Total.  That will give you your three FICO 8 Classic scores and a nice reliable 3B report.

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