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My credit score fell by 100 points after purchasing a car with instalment loan

sandymitsand
New Member

My credit score fell by 100 points after purchasing a car with instalment loan

To whom it may concern,

 

I purchased a car during last year's Thanksgiving (2016) and took a car loan at the same time. I thought my credit score could be elevated if I pay off instalments on time every month. However, the result is in the completely opposit direction. I have paid off the monthly instalment on time (actually the setup of autopay prevents from any possibilities of late payment) and all my other bills (utilities and credit cars) on time too. However, it is quite unexpecpted that my credit score fell sharply during Oct. to Dec. of 2016 by as many as 100 points. After almost a year of keeping paying everything on time/beforehand, the score is still not recovered, let alone enhanced. My monthly expeneses do not change at all during the past years, which means no other loans or collections, no sudden large amount of expense.  I am so disappointed by taking this car loan. Can anybody explain to me why this happened at all? And how I can improve my credit score in this case? (It seems I am stuck in a bottleneck.)

 

Sandy

 

Sandy

Message 1 of 12
11 REPLIES 11
Ardecko
Frequent Contributor

Re: My credit score fell by 100 points after purchasing a car with instalment loan

Where are you getting your credit score from, for each instance(then and now)?

 

What are the negative factors listed on your current report?

2017-09-09 FICO 08: EQ 677, TU 640, EX 705
2020-02-07 FICO 08: TU 789
2020-02-10 FICO 08: EX 752

Gardening, mostly, again until... soon(I need to replace my car)

Message 2 of 12
BrutalBodyShots
Super Contributor

Re: My credit score fell by 100 points after purchasing a car with instalment loan

Agreed that we need to know where you are getting your scores from.

 

It's completely impossible that your credit score would drop 100 points from anything car loan related, unless you had a reported late payment from that loan (which you said you have not).  Your score could have dropped say 15-20 points from the inquiry and new account, but within 3-6 months it would have recovered.  A 100 point score drop (if a genuine FICO score) suggests only the introduction of a negative piece of information to your credit report, or dramatically increasing utilization.  Did you happen to take your credit card(s) from low utilization to high utilization over this time period?

Message 3 of 12
Backwoods
Senior Contributor

Re: My credit score fell by 100 points after purchasing a car with instalment loan


@BrutalBodyShots wrote:

Agreed that we need to know where you are getting your scores from.

 

It's completely impossible that your credit score would drop 100 points from anything car loan related, unless you had a reported late payment from that loan (which you said you have not).  Your score could have dropped say 15-20 points from the inquiry and new account, but within 3-6 months it would have recovered.  A 100 point score drop (if a genuine FICO score) suggests only the introduction of a negative piece of information to your credit report, or dramatically increasing utilization.  Did you happen to take your credit card(s) from low utilization to high utilization over this time period?


 I will venture futher and suggest looking for a major derog like tax lien, charge off, 120 day late.  Utilization would require a huge change. Once 1 year has gone by the initial effects off the inq from the car loan should have gone causing atleast some increase 

Message 4 of 12
BrutalBodyShots
Super Contributor

Re: My credit score fell by 100 points after purchasing a car with instalment loan

Right, a major baddie would be the first thing to look for.  A 100 point FICO score change is extremely possible with a utilization change from the best tier of single-digits (or even the second tier from 9%-28.99%) going to maxed out.  If this were the case, though, certainly the OP would be much more aware that this was going on and you think would anticipate a score drop as a result.

Message 5 of 12
sandymitsand
New Member

Re: My credit score fell by 100 points after purchasing a car with instalment loan

Thank you so much for your answer. That's why I doubt it was because of the auto purchase that resulted in the drop of my credit score, because the purchase raised my utilization. But there are still some places that I cannot understand. First, I did not use any credit card to pay for the down payment of the car (I was not allowed to do so by the agent). Instead, I paid with cash. Will that also cause the increase of utilization? Secondly, my monthly expenses with credit cards did not really change during the past year. It kept around 20%, but I used one credit card much more times than the others. Still, there is no late payment at all (Acutally, I very carefully paid off all balance of my credit cards every time one or two weeks before the payment due date. ). In this case, would the credit score drop anyway? In this case, how is it possible for me to recover the score drop? Do you think it is a good idea to pay off the remaining car loan at once at this moment or to keep the loan?

 

Sandy

Message 6 of 12
BrutalBodyShots
Super Contributor

Re: My credit score fell by 100 points after purchasing a car with instalment loan

Hi Sandy.  We've asked a couple of times now where are getting your credit scores from and have not been given an answer yet.  Until we know the source of your scores, it's difficult to comment.

 

Installent loan utilization and revolving utilization are not at all connected.  What I mean is that if you take out an installment loan, your installment loan utilization will of course increase, but that has no bearing on your revolving utilization percentage.  Revolving utilization can impact your score 100 points, even more, if you're talking about going from near-zero (perfect) to maxed out.  Installment loan utilization will not impact score more than 25-30 points tops in going from best case to worst case.

Message 7 of 12
DaveInAZ
Senior Contributor

Re: My credit score fell by 100 points after purchasing a car with instalment loan

Yes, there's no way your score dropped 100 points just by added a car loan.

I was prepared to take a big hit last week. I bought a car on 9/1 and got a $15k loan from a local credit union, which reported that loan 10/5. I got 1/2 point better loan + longer payments from DCU, and transferred the loan to them. DCU reported the loan 10/31 while the local CU won't report their loan paid in full until 11/5. So this weekend's reports showed $30k in car loans, and my Fico8 score only dropped 3 points from the "double car loan" + another new account. And that's only for a few days until the local CU reports their loan PIF.

Message 8 of 12
donny10
Senior Contributor

Re: My credit score fell by 100 points after purchasing a car with instalment loan

Where are you getting your scores??????

Message 9 of 12
BrutalBodyShots
Super Contributor

Re: My credit score fell by 100 points after purchasing a car with instalment loan


@donny10 wrote:

Where are you getting your scores??????


I sort of feel like getting the answer to that isn't going to happen.

Message 10 of 12
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