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Paid off $16K+ and penalized

LXRM36
Established Member

Paid off $16K+ and penalized

So I'm working on bringing down debt piled up during the pandemic.  I was able to pay off a loan last month I took out to start my business.  Happened to make my final truck payment the same month.  Results?  -9, -6, and -5.

 

Simulator had a +5 to +15 boost for paying these loans off...  be careful not to set your expectations off the simulator!  Credit mix is not affected by this, and I have plenty of other debts still left to pay off.  But overall debt is decreasing every month.  I'm puzzled!

 

Sorry...  had to vent.

FICO8 Feb 2, 2022: EQ: 755 TU: 739 EX: 769
BOA World Rewards: AU $15.9K
CO Platinum MC: $2K
BOA Cash Rewards: $6.7K
CO Visa Plat: $1.75K
DESCO FCU: $10K
Best Buy CBNA: $3.5K
Sync Care Cred: $7.5K
Chase Sapphire Reserve: $23.5K
AMEX BCP: $32K
Chase Marriott Bonvoy Boundless: $15.1K
Disco it Miles: $19.5K
15 REPLIES 15
SouthJamaica
Mega Contributor

Re: Paid off $16K+ and penalized


@LXRM36 wrote:

So I'm working on bringing down debt piled up during the pandemic.  I was able to pay off a loan last month I took out to start my business.  Happened to make my final truck payment the same month.  Results?  -9, -6, and -5.

 

Simulator had a +5 to +15 boost for paying these loans off...  be careful not to set your expectations off the simulator!  Credit mix is not affected by this, and I have plenty of other debts still left to pay off.  But overall debt is decreasing every month.  I'm puzzled!

 

Sorry...  had to vent.


1 There is a penalty for all zero revolving balances.

2 There is a penalty for no open loans.

3 There is a penalty for having 10% or higher aggregate installment utilization percentage. This percentage can be increased when a nearly paid down loan is paid down to zero.

 

You haven't given us enough information to determine which of the above might have been at play.

 

Meanwhile congratulations on paying stuff down.

 

And btw don't pay attention to simulators, they are a joke.


Total revolving limits 689000 (587000 reporting) FICO 8: EQ 718 TU 721 EX 698

Message 2 of 16
Reelx3
New Member

Re: Paid off $16K+ and penalized

I paid off about 23k in credit card debt two weeks ago.  Prior scores were between 650 & 690.  Scores shot up to 740 - 760.  EQ Score dropped 53pts this morning because the last two cards finally reported as paid off.  Waiting for the other scores to follow.  

Message 3 of 16
thornback
Senior Contributor

Re: Paid off $16K+ and penalized


@Reelx3 wrote:

I paid off about 23k in credit card debt two weeks ago.  Prior scores were between 650 & 690.  Scores shot up to 740 - 760.  EQ Score dropped 53pts this morning because the last two cards finally reported as paid off.  Waiting for the other scores to follow.  


Welcome to the forums.

 

From where are you getting your EQ score? 53 points is far too great of a loss for simply paying off balances.

Personal Aphorism:"Forget What You Feel, Remember What You Deserve"
Starting FICO 8s | 09/2017: EX 641 ✦ EQ 634 ✦ TU 647
Current FICO 8s | 04/2022: EX 796 ✦ EQ 793 ✦ TU 790
Current FICO 9s | 04/2022: EX 790 ✦ EQ 788 ✦ TU 782
2022 Goal Score | 800s

My AAoA:
4.6 years not incl. AU / 4.9 years incl. AU
My AoOA: 9.2 years not incl. AU / 11.2 years incl. AU
Inquiries: EX 0/12 ✦ EQ 0/12 ✦ TU 0/12
Report Status: Clean
Garden Status:  


Without patience, we will learn less in life. We will see less. We will feel less. We will hear less. Ironically, rush and more usually mean less.
Message 4 of 16
RSX
Valued Contributor

Re: Paid off $16K+ and penalized

sounds like you may have paid off your only remaining loans - which resulted in the score drop - nothing to worry about

 

here's where you arent being penalized - Interest on both loans!

 

keep paying down your debt and try to focus on the Interest $ saved, more than the score bouncing up and down

difficult i know - but it is better to have zero debt and a lower FICO score - then lots of debt and a High FICO score

 

Congrats on the large paydown

Dec 16/2019. EX. 721. EQ. 723. TU 746
Dec 29/2020 EX. 729 EQ. 723 TU 746
Dec 29/2021 EX. 734 EQ. 739 TU 746
June 15/2022 EX. 709 EQ. 684 TU 710
Inq. EX 3 EQ 4 TU 3 - - CC 5x24, 2x12
Amex BCP $32k - Apple GS $19k - BMW/Elan $14k - Cap1 QS $16.7k - Chase Amazon $13.6k - Chase Bonvoy Boundless $10k - Chase United Club Infinite $26k - Citi DC $14.5k - CreditUnion1 $9k - DiscoverIT $25.5k - HSBC Gold - $13k - PayBoo - $7.6k - Penfed Gold - $12.5k - USB AltitudeGO -$16k- USBank Cash+ -$24k - PenFed LOC - $20k - USB LOC - $8k
Message 5 of 16
LXRM36
Established Member

Re: Paid off $16K+ and penalized

I'm gonna try to sort of reply to all 5 replies thus far here.

 

I'm with ya on the simulators.  Joke.

 

I have multiple loans remaining open, including two auto loans, one mortgage, and a home improvement loan.

 

I have multiple revolving lines of credit, which I'm paying down, but even the ones I zero out, I'm buying a tank of gas or a week of groceries to keep the card active with a balance I pay off each month.

 

I have one late from 2015 that is going to fall off later this year.


My aggregate is definitely +10%, actually much higher.  Again, coming down and no where near what it was in 2020.

 

I'm not overly concerned with the drop, it's just frustrating.  I had one balance go up $36, and my score increased.  I paid this loan off, my score dropped.  I decreased a balance on one card $350, my score increased.  🤷🏻‍♂️

It's all just very confusing.

FICO8 Feb 2, 2022: EQ: 755 TU: 739 EX: 769
BOA World Rewards: AU $15.9K
CO Platinum MC: $2K
BOA Cash Rewards: $6.7K
CO Visa Plat: $1.75K
DESCO FCU: $10K
Best Buy CBNA: $3.5K
Sync Care Cred: $7.5K
Chase Sapphire Reserve: $23.5K
AMEX BCP: $32K
Chase Marriott Bonvoy Boundless: $15.1K
Disco it Miles: $19.5K
Message 6 of 16
expatCanuck
Super Contributor

Re: Paid off $16K+ and penalized

FICO does not take into account DTI -- at least, not sensibly (to me, anyway).

 

Paying off my personal loan last month (I still have a mortgage) resulted in a FICO 8 drop.  But it's far more important to me that I have an extra few hundred each month to do with as I see fit. 

 

Fair Isaac rationalizes this by pointing out the stats showing that folks with an actively managed loan are less likely to default than folks without one.

 

Whatevah.


2022 Goal: save 3 months' net income

Starting FICO8: 666 (give or take)  [ Last INQ 15-Mar-2022 ]
EQ8145 INQ (2 CC 2 mort, car)7y0m
EX7986 INQ (4 CC, 2 mort)6y11m
TU8272 INQ (2 mort)6y5m
4/243/12AoYA 2m | AoOA 23y4m< 1%
Message 7 of 16
thornback
Senior Contributor

Re: Paid off $16K+ and penalized


@LXRM36 wrote:

I'm gonna try to sort of reply to all 5 replies thus far here.

 

I'm with ya on the simulators.  Joke.

 

I have multiple loans remaining open, including two auto loans, one mortgage, and a home improvement loan.

 

I have multiple revolving lines of credit, which I'm paying down, but even the ones I zero out, I'm buying a tank of gas or a week of groceries to keep the card active with a balance I pay off each month.

 

I have one late from 2015 that is going to fall off later this year.


My aggregate is definitely +10%, actually much higher.  Again, coming down and no where near what it was in 2020.

 

I'm not overly concerned with the drop, it's just frustrating.  I had one balance go up $36, and my score increased.  I paid this loan off, my score dropped.  I decreased a balance on one card $350, my score increased.  🤷🏻‍♂️

It's all just very confusing.


Your confusion is totally understandable.  Look at the utilization of loans the same as your utilization with credit cards -- you have aggregate and individual and there are separate scoring thresholds specifically for loan utilization. 

 

In this case, your aggregate loan utilization changed with your payoff.   If you were to compare the aggregate utilization of your loans prior to the payoff to the aggregate util of the remaining open loans post payoff -- it's possible (likely) the utilzation increased.  For example:

 

Loan 1:  7000/10000 

Loan 2: 5000/15000

Loan 3: 500/5000

Aggregate:  12500/30000  41.66%

 

Payoff 1 of those loans: 

Loan 1: 7000/10000

Loan 2:  5000/15000

Loan 3: 0/0

Aggregate: 12000/25000 48%

 

Payoff 2 of those loans:

Loan 1: 7000/10000

Loan 2: 0/0

Loan3: 0/0

Aggregate: 7000/10000 70%

 

Either of the 2 payoff scenarios results in increased aggregate loan utilization which could negatively affect scoring. 

 

I cannot say why you saw an increase with a credit card balance increase of $36...  It's possible the score increase had nothing at all to do with the balance increase and a separate event simply coincided with the new balance reporting.   If you were alerted to a balance increase and that alert was tagged with a resulting score change, please understand that the reason of the alert is not necessarily the reason for the change in score.   The alert triggering event (balance change) simply prompted an updated score be pulled and presented to you. 

 

Debt payoff is a good thing.  Definitely keep doing the good thing.

Personal Aphorism:"Forget What You Feel, Remember What You Deserve"
Starting FICO 8s | 09/2017: EX 641 ✦ EQ 634 ✦ TU 647
Current FICO 8s | 04/2022: EX 796 ✦ EQ 793 ✦ TU 790
Current FICO 9s | 04/2022: EX 790 ✦ EQ 788 ✦ TU 782
2022 Goal Score | 800s

My AAoA:
4.6 years not incl. AU / 4.9 years incl. AU
My AoOA: 9.2 years not incl. AU / 11.2 years incl. AU
Inquiries: EX 0/12 ✦ EQ 0/12 ✦ TU 0/12
Report Status: Clean
Garden Status:  


Without patience, we will learn less in life. We will see less. We will feel less. We will hear less. Ironically, rush and more usually mean less.
Message 8 of 16
expatCanuck
Super Contributor

Re: Paid off $16K+ and penalized

@thornback 

Excellent write-up.

 

Oh, and I LOVE the tag on the BoA Americard in your sig. 👍


2022 Goal: save 3 months' net income

Starting FICO8: 666 (give or take)  [ Last INQ 15-Mar-2022 ]
EQ8145 INQ (2 CC 2 mort, car)7y0m
EX7986 INQ (4 CC, 2 mort)6y11m
TU8272 INQ (2 mort)6y5m
4/243/12AoYA 2m | AoOA 23y4m< 1%
Message 9 of 16
thornback
Senior Contributor

Re: Paid off $16K+ and penalized


@expatCanuck wrote:

@thornback 

Excellent write-up.

 


TY!

 


@expatCanuck wrote:

Oh, and I LOVE the tag on the BoA Americard in your sig. 👍


haha... it's been a year and 1 month and i'm still really annoyed with myself for app'ing it.   AND... to further twist the knife... i have no CLI button - it has not appeared... not even once. And I refuse to call them about it. 

Personal Aphorism:"Forget What You Feel, Remember What You Deserve"
Starting FICO 8s | 09/2017: EX 641 ✦ EQ 634 ✦ TU 647
Current FICO 8s | 04/2022: EX 796 ✦ EQ 793 ✦ TU 790
Current FICO 9s | 04/2022: EX 790 ✦ EQ 788 ✦ TU 782
2022 Goal Score | 800s

My AAoA:
4.6 years not incl. AU / 4.9 years incl. AU
My AoOA: 9.2 years not incl. AU / 11.2 years incl. AU
Inquiries: EX 0/12 ✦ EQ 0/12 ✦ TU 0/12
Report Status: Clean
Garden Status:  


Without patience, we will learn less in life. We will see less. We will feel less. We will hear less. Ironically, rush and more usually mean less.
Message 10 of 16
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