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FICO SCORE DECLINE DUE TO AUTO REFI

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FICO SCORE DECLINE DUE TO AUTO REFI

Hey guys i am hoping you can shed some light onto what happened for me.  I lost about 20 pts from each bureau when i refinanced my auto loan.  As soon as the old one showed as paid/zero balance it created a 20 pt drop in my score  ( my fico actually shows my score before the closure and then after so i know it is not something going on in the back ground it is directly related to the refi). Since then the new auto loan for my credit union as been added but my score has not increased.  The closure occured in october and the new account was added this month... Any ideas on when this and if it will recover ?  I dont understand honestly.

 

 

MY FICO: EQ: 646/ TU 675/ EXP 665.

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Message 1 of 7
6 REPLIES 6
Contributor

Re: FICO SCORE DECLINE DUE TO AUTO REFI

A little more info on your overall report would be helpful:

 

  • How many accounts do you have open/closed on your report?
  • How old are your accounts?

Everyone's situation is different but here's my guess (again, this is just a guess):

 

Your AAoA (average age of accounts) has probably dropped now that there's a new refi loan added to your account.  This would be one reason for a score drop, although 20 points seems hefty. But depending on the current age of your opened/closed accounts, it's possible.  For instance, my friend saw a 30 point drop after getting his second credit card; his first card was about five years old, so his AAoA dropped in half.

 

I've also seen many people on this board mention that a paid off loan will usually drop your score.  Your report probably showed the first loan as "paid off" which could've possibly dropped your score as well - I'm not 100% about this though; as many others have suggested the contrary.

 

In addition to that, if your CU did a hard pull on your report, that could also ding your score a bit.  

 

So between the first auto loan getting paid off, the new loan posting to your account (and in turn dropping your AAoA) and a hard pull hitting your credit report, maybe those factors combined equated to a ~20pt drop.  Again, I'm just speculating here.  Assuming this is the case, the good news is that your scores should climb back up eventually, as the new loan ages and you continue to make timely payments. 

CURRENT (11/28/2014 myFico): EQ 690, TU 679, EX 683
10/01/2014: EQ 626, TU 657, EX 638

Chap7 BK in 12/2008 · Goal: 700s
Message 2 of 7
New Member

Re: FICO SCORE DECLINE DUE TO AUTO REFI

Ok, this exact thing happened to me, only mine got whacked even harder 37 points!

 

I'm still not certain myself but think I can explain a bit better.  Avg age of accts is maybe a little bit of it (I'm suseptable to that too), but mostly i beleive is from your credit utilization ratio going way up.

 

Here was my scenario, bought a car about 5 months ago, got a chunk of dough and paid down loan right away to about almost half original loan amt.  then I refi at much better rate, although i'm only refinancing remaining balance, new loan shows i owed 100% of amount borrowed copared to old loan, which was almost 50%.

 

While this seems f@%ked up to me and pretty unfair, it was idendicle to your situation.  new loan reported first, although it was new accnt, no hit from avg age.  Then my old loan reported paid in full and closed, then WHAM 37 points.

 

Folks spend so much time on this stuff and to be honest, it's all just a total scam.

Message 3 of 7
Super Contributor

Re: FICO SCORE DECLINE DUE TO AUTO REFI


@oliverlickerish wrote:

Ok, this exact thing happened to me, only mine got whacked even harder 37 points!

 

I'm still not certain myself but think I can explain a bit better.  Avg age of accts is maybe a little bit of it (I'm suseptable to that too), but mostly i beleive is from your credit utilization ratio going way up.

 

Here was my scenario, bought a car about 5 months ago, got a chunk of dough and paid down loan right away to about almost half original loan amt.  then I refi at much better rate, although i'm only refinancing remaining balance, new loan shows i owed 100% of amount borrowed copared to old loan, which was almost 50%.

 

While this seems f@%ked up to me and pretty unfair, it was idendicle to your situation.  new loan reported first, although it was new accnt, no hit from avg age.  Then my old loan reported paid in full and closed, then WHAM 37 points.

 

Folks spend so much time on this stuff and to be honest, it's all just a total scam.


Perhaps, but OP statement that "MyFICO showed the paid loan as the reason for the decline" is not the whole story. More information is needed about what else happened in the file over the prior months to make sense of the score change. Not saying the paid loan won't have an impact, because it temporarily does, but you have to allow the score then to recalibrate to the new set of information, including losing the benefit of having an open term loan, counted differently from revolving credit cards. That term loan has been slowly building benefit over XX number of months as a good trade line. The new auto loan should replace that in the mix fairly quickly.

 

Not a scam, just an algorithm that has to be allowed to digest new information periodically.

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
Message 4 of 7
New Visitor

Re: FICO SCORE DECLINE DUE TO AUTO REFI

I just paid off an auto loan in full and my score dropped 19 points,  817->798. This was not a new loan, but one I have been making steady payments to for more than two years. There is a process to despute items on our reports but not the score (I think). To me, this is backwards scoring. I would think my score would improve. I know my whole credit profile has to be concidered to judge this downward scroring correctly, but I have plenty of other good active credit (mortgage, credit cards, etc.)

 

Is it possible to dispute the FICO score?

Message 5 of 7
Valued Contributor

Re: FICO SCORE DECLINE DUE TO AUTO REFI


@k6ow wrote:

I just paid off an auto loan in full and my score dropped 19 points,  817->798. This was not a new loan, but one I have been making steady payments to for more than two years. There is a process to despute items on our reports but not the score (I think). To me, this is backwards scoring. I would think my score would improve. I know my whole credit profile has to be concidered to judge this downward scroring correctly, but I have plenty of other good active credit (mortgage, credit cards, etc.)

 

Is it possible to dispute the FICO score?


No

 

And your score will bounce back.  You still have prime credit, so unless you're seeking new/additional credit, it really doesn't matter.

Message 6 of 7
Valued Contributor

Re: FICO SCORE DECLINE DUE TO AUTO REFI


@EDGE1230 wrote:

Hey guys i am hoping you can shed some light onto what happened for me.  I lost about 20 pts from each bureau when i refinanced my auto loan.  As soon as the old one showed as paid/zero balance it created a 20 pt drop in my score  ( my fico actually shows my score before the closure and then after so i know it is not something going on in the back ground it is directly related to the refi). Since then the new auto loan for my credit union as been added but my score has not increased.  The closure occured in october and the new account was added this month... Any ideas on when this and if it will recover ?  I dont understand honestly.

 

 


Check out some of the stickies/pinned topics at the top of this page.  They may help in understanding.

 

Everyone's situation is different.  Much depends on your total credit portrait at any given time.  If that is your only installment loan, that could be part of the explanation, as scoring is looking for the optimal mix of credit types.  I have done refi's over the course of my credit journey.  Some resulted in points lost, my most recent one had no affect on scoring at all, primarily due to the fact that I had other installment loans at the time, and it was actually favourable to reduce one installment loan, albeit replaced by another installment loan. 

 

Scores only matter if you're looking for new credit.  They are going to fluctuate over time; given time and all other things being equal, scores generally bounce back.

Message 7 of 7
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