So I got a rude alert from Experian.
I just got an 11 point score decrease for paying off the auto loan and closing.
It says it does not impact credit worthiness - but what does that mean ???
How come I get penalized for doing the right thing (paying off a loan in full) ?
How long will this drop haunt me ?
Will it affect mortgage FICO scores ??
I'm going to start home buying and don't want this to hurt the interest rate & affordability budget...
@4sallypat wrote:So I got a rude alert from Experian.
I just got an 11 point score decrease for paying off the auto loan and closing.
It says it does not impact credit worthiness - but what does that mean ???
How come I get penalized for doing the right thing (paying off a loan in full) ?
How long will this drop haunt me ?
Will it affect mortgage FICO scores ??
I'm going to start home buying and don't want this to hurt the interest rate & affordability budget...
Presumably this is due either to a change in your aggregate installment utilization percentage, or your having no open installment loan. We would need to know more about your profile to say which.
In either case, it is not likely to have affected your mortgage score.
@SouthJamaica wrote:
@4sallypat wrote:So I got a rude alert from Experian.
I just got an 11 point score decrease for paying off the auto loan and closing.
It says it does not impact credit worthiness - but what does that mean ???
How come I get penalized for doing the right thing (paying off a loan in full) ?
How long will this drop haunt me ?
Will it affect mortgage FICO scores ??
I'm going to start home buying and don't want this to hurt the interest rate & affordability budget...
Presumably this is due either to a change in your aggregate installment utilization percentage, or your having no open installment loan. We would need to know more about your profile to say which.
In either case, it is not likely to have affected your mortgage score.
Glad to hear that the mortgage score will not be affected as much.
So I have another auto loan (lease) that is 75% done.
And I have a PLOC that is 20% done.
Do you think the score drop will make up soon ?
What is a "Credit Rating" that is mentioned in the message ?
@4sallypat wrote:So I got a rude alert from Experian.
I just got an 11 point score decrease for paying off the auto loan and closing.
It says it does not impact credit worthiness - but what does that mean ???
How come I get penalized for doing the right thing (paying off a loan in full) ?
How long will this drop haunt me ?
Will it affect mortgage FICO scores ??
I'm going to start home buying and don't want this to hurt the interest rate & affordability budget...
Regarding the "credit rating didn't drop" means you stayed in the same rating, whether that was fair, good, very good or exceptional. You didn't drop to the next rating.
@4sallypat wrote:
@SouthJamaica wrote:
@4sallypat wrote:So I got a rude alert from Experian.
I just got an 11 point score decrease for paying off the auto loan and closing.
It says it does not impact credit worthiness - but what does that mean ???
How come I get penalized for doing the right thing (paying off a loan in full) ?
How long will this drop haunt me ?
Will it affect mortgage FICO scores ??
I'm going to start home buying and don't want this to hurt the interest rate & affordability budget...
Presumably this is due either to a change in your aggregate installment utilization percentage, or your having no open installment loan. We would need to know more about your profile to say which.
In either case, it is not likely to have affected your mortgage score.
Glad to hear that the mortgage score will not be affected as much.
So I have another auto loan (lease) that is 75% done.
And I have a PLOC that is 20% done.
Do you think the score drop will make up soon ?
What is a "Credit Rating" that is mentioned in the message ?
1. PLOC's are calculated just like credit cards; so they are a totally different story.
2. The fact that you have a 75% paid off auto loan explains what happened. Your aggregate installment loan utilization percentage was probably < 10% before the loan payoff, and has now leaped to 25%. So as soon as your loan is 91% paid off, you'll get those points back where you lost them.
3. The "credit rating" they're talking about is not a part of the algorithm. It's just their classification of your profile as "Good" "Very Good" "Excellent" and Experian's saying their classification of your profile hasn't changed -- i.e. you're still within the same range. This is completely meaningless and just meant to give some general indication to people in their consumer-facing software. I'm sure the lender never sees it and could care less about it.
4. Most likely the mortgage score hasn't been, and won't be, affected at all. If it is affected, it will probably be by 2 points or so.
@SouthJamaica wrote:
@4sallypat wrote:
@SouthJamaica wrote:
@4sallypat wrote:So I got a rude alert from Experian.
I just got an 11 point score decrease for paying off the auto loan and closing.
It says it does not impact credit worthiness - but what does that mean ???
How come I get penalized for doing the right thing (paying off a loan in full) ?
How long will this drop haunt me ?
Will it affect mortgage FICO scores ??
I'm going to start home buying and don't want this to hurt the interest rate & affordability budget...
Presumably this is due either to a change in your aggregate installment utilization percentage, or your having no open installment loan. We would need to know more about your profile to say which.
In either case, it is not likely to have affected your mortgage score.
Glad to hear that the mortgage score will not be affected as much.
So I have another auto loan (lease) that is 75% done.
And I have a PLOC that is 20% done.
Do you think the score drop will make up soon ?
What is a "Credit Rating" that is mentioned in the message ?
1. PLOC's are calculated just like credit cards; so they are a totally different story.
2. The fact that you have a 75% paid off auto loan explains what happened. Your aggregate installment loan utilization percentage was probably < 10% before the loan payoff, and has now leaped to 25%. So as soon as your loan is 91% paid off, you'll get those points back where you lost them.
3. The "credit rating" they're talking about is not a part of the algorithm. It's just their classification of your profile as "Good" "Very Good" "Excellent" and Experian's saying their classification of your profile hasn't changed -- i.e. you're still within the same range. This is completely meaningless and just meant to give some general indication to people in their consumer-facing software. I'm sure the lender never sees it and could care less about it.
4. Most likely the mortgage score hasn't been, and won't be, affected at all. If it is affected, it will probably be by 2 points or so.
Wow, what a relief!
Thanks so much for that explanation @SouthJamaica - very settling now that I have heard from the experts!
Another bonus to consider is that by paying off your auto loan, your DTI (debt to income ratio) is now lower which is good. That means you have one less payment obligation, in the eyes of mortgage lenders.
@KLEXH25 wrote:Another bonus to consider is that by paying off your auto loan, your DTI (debt to income ratio) is now lower which is good. That means you have one less payment obligation, in the eyes of mortgage lenders.
Yes, that is a good signal to the banks as we are $500 / month less obligated and we own the car.
Hoping to get a house before the end of the year when my last auto obligation (lease) ends where I will be buying out the car and financing it with a new loan.....