Paid off loans will kick you in the teeth

[Jwagner]

Not exactly a newsflash ... we all know this of course.

This drop is from my NFCU loan term ending and being paid off (the only loan I had)

[SouthJamaica]

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@Jwagner wrote:

Not exactly a newsflash ... we all know this of course.

This drop is from my NFCU loan term ending and being paid off (the only loan I had)

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Yeah that's a kick in the teeth all right.

Question: how did it affect your scores other than FICO 8?

[Anonymous]

If I were you I'd look very closely at my TU report to try to figure out why that score did not drop at all.  It should have.  There's no precedent for TU FICO 8 being completely unaffected by installment utilization, and you went from an open loan that was almost completely paid off to no open loans at all.

Two possibilities that occur to me:

(1)  There is some account on the TU report that is being treated as an installment account (e.g. an auto lease, an agreement with Rooms To Go to finance a sofa, etc.).

(2)  The loan on TU had not at that time appeared as a closed loan with a zero balance.

[Anonymous]

My guess is that as of June 29th when his TransUnion score was last provided the installment loan hadn't yet reported as closed.

[Jwagner]

You would be correct. TU was not yet reported when I took the screenshot this morning... It actually reported this afternoon and dropped 35pts to 679.

[Anonymous]

The good news is that Navy Fed is one of the few places we have been able to confirm is a good fit for the Share Secure Loan Technique.  Should be easy to get your points back, or most of them.

[Anonymous]

Guess this will be me in 5 years.

[arkane]

As long as you have no baddies and grow your file at a steady pace (let's say two cards per 12 months), by the time the loan is paid off you should be well over 800, and a 30+ point drop should still keep you in the high 700s.

[Smooth_J]

The same happened with me since I just refinanced, and my original mortgage just reported in as 0 balance. My scores went down on average 8 points across the three CRAs. Sometimes I hate this "game"…

[Anonymous]

The presence of an open installment loan and it's impact on score I feel can be looked at as the glass half full verses glass half empty. 

Everyone always talks about how closing their loan adversely impacts their score.  The flipside of this that doesn't get thought about much is that before that loan was ever opened, their profile was exactly the same [with respect to the presence of a loan].  Before the loan, your score is X.  You add the loan and when it's almost paid off your score is X+Y.  Once the loan is gone, you lose Y and you're back at X, right where you started.  Really there was no penalty for paying off the loan, there was simply a bonus verses the starting point (X) when it was open and almost paid off.

Once someone has that bonus, they simply don't want to lose it.  You don't see anyone though who hasn't opened an installment loan yet complaining that their score is being adversely impacted though and they're in the same boat as someone that just closed their only installment loan (no open loan present).  It's just one of those things like anything in life where once you have something (nice car/house, love, money, dream job, etc) and lose it you miss it far more than before you ever had it in the first place.  It's all relative.