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Help! All 3 FICO scores dropped after car loan paid

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Established Member

Help! All 3 FICO scores dropped after car loan paid

I decided to buy another SUV before my prior car loan was paid.  The prior loan was almost 50% paid. The loan was paid off by a trade in and I bought the new SUV with a new loan. The prior loan appears as paid as of one week ago. All three credit bureau scores dropped by almiost 20 points! When the new car loan appears will the score drop further or will it likely go up? Thanks for any help provided.

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Established Contributor

Re: Help! All 3 FICO scores dropped after car loan paid

That's more than normal, do you have any other loans active?

 

When the new loan hits, you can expect another drop probably.. but it will resolve itself once you get your threshold down.

 

 



Message 2 of 9
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Re: Help! All 3 FICO scores dropped after car loan paid

No other active loans - just CCs that I pay in full.

 

Will the score likely go up once the new loan starts posting?

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Re: Help! All 3 FICO scores dropped after car loan paid


@sandcatcher wrote:

No other active loans - just CCs that I pay in full.

 

Will the score likely go up once the new loan starts posting?


Nothing to worry about then, this seems completely normal. Only once you hit 8.9% of your loan paid off, will you see the 'maximum' 'sizable' benefit. Try and look at loans as a marathon, and not a race. With responsible use of your other accounts, and continued on-time loan payments, your score will benefit Smiley Happy. Hope i've helped!



Message 4 of 9
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Re: Help! All 3 FICO scores dropped after car loan paid

I always pay my accounts on time. I am trying to find out if my score is going to drop more when the new car loan appears. I think a 20 point drop is significant especially since there was a similar drop a few months ago when I paid off an Amex loan. The drop from the Amex loan has not been recovered despite nothing but on time payments. 

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Super Contributor

Re: Help! All 3 FICO scores dropped after car loan paid

Your score may drop a little more from the new account reporting, but you'll get back points related to the "Amounts Owed" sector of the Fico pie.  I wouldn't expect you to get back all 20 points since you'll be going from a 50% utilization loan to a 100% utilization loan, but the points you get back I would think in most cases would wash out the points lost from the new account reporting.  How long before this new loan did you open an account?  If it was within the last year, your score drop related to the new account won't be as significant as if you hadn't opened an account within the last year.

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Re: Help! All 3 FICO scores dropped after car loan paid

The prior auto loan was opened almost two years (August 2017)prior to the new auto loan. I opened the new loan at the end of July 2019 at the same time the other auto loan was paid off. 

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Super Contributor

Re: Help! All 3 FICO scores dropped after car loan paid

And no other accounts of any kind (credit card, whatever) were opened between the two loans?

 

If that's the case, your AoYA dropped from > 12 months to 0 months, which in and of itself depending on profile can drop Fico scores 15-25 points.

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Re: Help! All 3 FICO scores dropped after car loan paid


@sandcatcher wrote:

I decided to buy another SUV before my prior car loan was paid.  The prior loan was almost 50% paid. The loan was paid off by a trade in and I bought the new SUV with a new loan. The prior loan appears as paid as of one week ago. All three credit bureau scores dropped by almiost 20 points! When the new car loan appears will the score drop further or will it likely go up? Thanks for any help provided.


It is surprising to me that the payoff alone would have cost 20 points. I would have expected a drop but not that much of a drop.

 

In any event, you're being penalized at the moment -- in the FICO 8 scores -- for lack of "credit mix", because those particular scores only take into account an open installment loan, not a closed one.

 

You'll lose that penalty when the new loan hits, which is a positive.

 

But you'll also receive a negative effect from having a loan on which 100% of the loan amount is unpaid.

 

I really have no idea whether the negative will outweigh the positive, or vice versa, or whether they will cancel each other out. I can only say that as you pay the new loan down, you'll pick up a few points here and there, and a lot of points when you get it down to the neighborhood of 9% of the original loan balance.


Total revolving limits 648500 (572500 reporting) FICO 8 EQ 721 TU 744 EX 729

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