@Anonymous wrote:I'm new to the credit rebuilding process and haven't figured it out yet. I got a alert today from Exp. that my score dropped 12 pts. I have a small installment loan that I've had for over a year. I use it for payment history and credit mix. This time when I refinanced it my score dropped. I've refinanced this loan before with no affect on my score. I refinanced it in April and made my May payment and BOOM a 12 pt decrease today. They reported the refinance to all 3 CRA in April along with my May payment. Why the 12 pt drop now? Why just the score change on Exp? What am I missing. Thanks for any and all replies.
Usually there's a drop in FICO 8 when you refinance, because your installment utilization percentage goes up. Plus you have a hard pull and a new account, which not only lowers your average age of accounts but also resets your age of newest account. One shouldn't just randomly refinance, because it's a new account -- and all the negatives that come with it -- every time you do.
@Anonymous wrote:Thanks SJ, So to get these points back as quickly as possible should I pay this loan way down(it's only 450) or off. I don't have a mortgage or car payment right now. Just my CC and this loan. Would paying this loan off(only installment loan I have)hurt me more?
Considering that you have no other installment loan out there, the way to get a boost out of it is to pay it down to 9% of the original loan amount. If it's a $450 loan, pay it down to $40. If it's a $1000 loan, pay it down to $90. Then pay as little as possible on it from that point on. You will get a nice boost in FICO 8's and 9's, and maybe even a little on some of the others.
If they don't advance the next payment date, please report back to us, and identify the lender, because we are looking for lenders who will let you partially prepay without advancing the next payment date!
@Anonymous wrote:Not sure how this is going to work. The loan company said I have 6 payments of 71 dollars left and at the end, it's either refi. or pay off. So I will take a hit either way, losing the installment account and take a hit or refi. and take a hit. I think I might get a loan from my CU and pay this one off and bring my UTI on the CC down to 9%. Then I'll still have the install. but with a longer payment schedule and help my uti on the cards. What do you think SJ?
I think you shouldn't be dealing with loan companies.
And I think you should stop refinancing. Each time you do it you dig your hole deeper with new accounts and inquiries.
But if you could get a LONG TERM loan from the credit union, and they won't accelerate the next payment date on partial prepayment (NFCU is the only one I know that can be relied on not to accelerate the next payment date), then ok. Otherwise, just bite the bullet.
These loans are hurting your credit.
When you refinance it adds a new account. Doing that at first was ok since almost all of your accounts were around the same age. Now since your only credit card is beginning to show its years any new account will average the age out causing a massive drop. In the past you had the benefit of expanding the credit mix to counter the drop from the age decrease. Now that is not going to work as well since the age decrease becomes sharper as the average account age without your newest grows.
Also be aware that scores are calculated at the time that they are made. This will use all the info that is at that point in time on the report. If new info is reported later then you will need to have the score recalculated for it to be accurate. Scores shown on sites generally are cached for a week to a month with a date listed for when they are made.
