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Paid off car loan and score dropped 27 points

FishingGuy
Contributor

Re: Paid off car loan and score dropped 27 points

Those were Fico 8 scores from here, so I know they were real.... went from high 770's / 780s.... down to 730's/740 when the payoff occurred which got me nervous... then a few weeks later..... when the new loan reported scores dropped to 720's 7teens.... which got me VERY nervous and upset.  

 

I actually had someone review everything/ all three reports at that time.... to make sure nothing else negative  "popped up".     
> Please note, at that time I did have a thin file.... though more than 10 accounts AAOA was low ( under 2 years, maybe even under 1 ).... but the drop still SHOCKED me.     It's about 8 months later and I'm back into the mid 750's now and gardening.

Message 11 of 21
BallBounces
Established Contributor

Re: Paid off car loan and score dropped 27 points


@stefanilinn wrote:

I made my 60th payment to BMW financial services Thursday. They reported in on Friday as paid and closed. On Monday, my score dropped 27 points. I am so sad. It went from 750s to 720s. How? I thought this was a good thing?


It's one of the more irritating phenomena associated with many of the FICO algorithms, isn't it?  Take solace in the fact that you are fundamentally better off than you were the month before you paid it off, even if your FICO score does not seem to say so.  Kudos for that!

 

The discretely frustrating part is one appears less qualified for debt, after having just resolved a debt agreement.

 

 

050719:     
020321:     



Current scores are in see - saw mode. Going to be choppy for a couple years, but hoping to break above 700 across all three and stay there in 2021.
Message 12 of 21
BrutalBodyShots
Super Contributor

Re: Paid off car loan and score dropped 27 points


@FishingGuy wrote:

Those were Fico 8 scores from here, so I know they were real.... went from high 770's / 780s.... down to 730's/740 when the payoff occurred which got me nervous... then a few weeks later..... when the new loan reported scores dropped to 720's 7teens.... which got me VERY nervous and upset.  

 

I actually had someone review everything/ all three reports at that time.... to make sure nothing else negative  "popped up".     
> Please note, at that time I did have a thin file.... though more than 10 accounts AAOA was low ( under 2 years, maybe even under 1 ).... but the drop still SHOCKED me.     It's about 8 months later and I'm back into the mid 750's now and gardening.


I don't doubt that your scores dropped as much as you said, I simply doubt that the only cause was the loan payoff.  I personally think that other influences magnified the actual drop.  As I stated earlier, that would be an extreme outlier situation if the loan chance in and of itself lowered your score that much.

 

If you had more than 10 accounts, you did not have a thin file. 

Message 13 of 21

Re: Paid off car loan and score dropped 27 points

I don't know whether this is relevant or not, but from my personal experience when I did do a refinance, the loan account showed as "paid", which my score jumped about +10 points. But only until a new loan has been added to the report, my score dropped to around 17 points. My score was around the mid 600s. Am I the only one here who experienced a positive report after having a (terrible) loan being shown has paid?

Message 14 of 21
spiritcraft1
Valued Contributor

Re: Paid off car loan and score dropped 27 points

Get an SSL and pay it down to 8.9%...  scores will bounce back.


| |

Rebuilding from a sudden, swift and complete credit disaster in early 2014 | Starting Scores 2017 = High 300's - Low 400's
8-1-18 -
12-24-18 -
Current F08 -
Current 2,4,5 -
Current F09 -

Biz Credit in Order of Approval - Uline, Quill, Grainger, SupplyWorks, MSC, Amsterdam, Citi Tractor Supply Rev .8k, Amazon Net 55 $5.5k, NewEgg Net 30 10k, Richelieu 2k, Wurth Supply 2k, Global Ind 2k, Sam's Club Store 11.k, Shell Fleet 19.5k, Citi Exxon 2.5k, Dell Biz Revolving $15k - All No PG || PG Accounts: AMEX Biz Gold NPSL | AMEX Biz Plat NPSL | AMEX Blue Cash and Plus Cards
Message 15 of 21
babygirl1256
Valued Contributor

Re: Paid off car loan and score dropped 27 points

@DarkKnight_Credit How long did it take you to regain the 17-point loss of adding the new loan? I need to watch my scoring as I approach payoff of my SUV. Thank you for posting!!!

Starting FICO 8 Score in 06/2019: EQ-625, TU-649, EX-640
Current FICO 8 Score in 06/2021: EQ-796, TU-806, EX-812
Goal FICO 8 Score in 06/2022: EQ-825, TU-850, EX-850
Message 16 of 21

Re: Paid off car loan and score dropped 27 points

Anytime!

 

It took about at least 6 months for me to get those points back.

Message 17 of 21
Birdman7
Super Contributor

Re: Paid off car loan and score dropped 27 points

Just for knowledge sake, there is a age of oldest & average Installment Account metrics, and age of oldest and average open installment Account Metrics, age of oldest and average Mortgage Accounts metrics, and age of oldest and average open mortgage accounts Metrics.

So not only does B/L come in to play from the amounts owed category, but the length of history category comes into play.
-Scoring wisdom: Credit Scoring Primer, Payment History, Amount of Debt, Length of History/New Credit, Mix/Disputes/Freezes/Searches, Mortgage Scores/Negative Reason Codes/V.9, Helpful Links,
CassieCard’s Reason Statements Thread,
iv's friendly statement to reason statement concordance,

ccquest’s Workbook to calculate metrics.
Clean/Thick/Mature/No New Revolver - 8,9; Clean/Thick/Mature/No New Account - 5/4/2.
Correct Ag.Util. under 5% all times. (Oldest/avg varies. Estimates above.)
Real world mortgage maxes are: EQ5-818, TU4-839, EX2-844.




(Everything said is JMHO and is not endorsed by FICO or MF. I have no affiliation with either, just a grateful member.)
Message 18 of 21
hazmat2021
New Member

Re: Paid off car loan and score dropped 27 points

in October 2020 i paid off my only loan and in November my score dropped 45pts with no other changes. I going to do a credit builder loan for 2 years until i purchase my house too prevent this type of BS in the future. The game has always been rigged but its still neauseating when it slaps you in the face. oNLY A SYSEM CREATED BY THOSE WHO PROFIT FROM IT WOULDNOT AWARD CREDIT POINTS FOR PAYING OFF A LOAN THAT SHOULD COUNTER BALANCE YOUR NEW CREDIT MIX.

Message 19 of 21
Birdman7
Super Contributor

Re: Paid off car loan and score dropped 27 points


@hazmat2021 wrote:

in October 2020 i paid off my only loan and in November my score dropped 45pts with no other changes. I going to do a credit builder loan for 2 years until i purchase my house too prevent this type of BS in the future. The game has always been rigged but its still neauseating when it slaps you in the face. oNLY A SYSEM CREATED BY THOSE WHO PROFIT FROM IT WOULDNOT AWARD CREDIT POINTS FOR PAYING OFF A LOAN THAT SHOULD COUNTER BALANCE YOUR NEW CREDIT MIX.


@hazmat2021 Please hear me out before you carry out your plans. The point you lost you likely only lost on 8/9 and going and getting a SSL and paying it down, it's only really gonna give you points on 8/9.


Installment Utilization does not really affect the mortgage Scores much, so all you're going to be doing by going to get the SSL is lowering your average ages and making sure that you're on a new account Scorecard for the next year and a half on the mortgage Scores by doing that. 

why would someone create a system if they didn't have the incentive of profit? there's nothing wrong with someone creating a system for profit. As long as the system works. problem is, you don't understand how the system works, and appearances look bad without understanding the mechanics.

 

they're not penalizing you for paying off the loan. They're taking back the bonus points they gave you for having a nearly paid off loan. You see, when you have an open loan they give you points for that in the amounts owed category, and as you pay it down, you get more points. well once it's paid off, why should you keep those points? you no longer have it? But from the outside looking in it looks like they're penalizing you for paying off the loan when in reality you were being rewarded for your proper active management of it which is now over.

-Scoring wisdom: Credit Scoring Primer, Payment History, Amount of Debt, Length of History/New Credit, Mix/Disputes/Freezes/Searches, Mortgage Scores/Negative Reason Codes/V.9, Helpful Links,
CassieCard’s Reason Statements Thread,
iv's friendly statement to reason statement concordance,

ccquest’s Workbook to calculate metrics.
Clean/Thick/Mature/No New Revolver - 8,9; Clean/Thick/Mature/No New Account - 5/4/2.
Correct Ag.Util. under 5% all times. (Oldest/avg varies. Estimates above.)
Real world mortgage maxes are: EQ5-818, TU4-839, EX2-844.




(Everything said is JMHO and is not endorsed by FICO or MF. I have no affiliation with either, just a grateful member.)
Message 20 of 21
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