Paid off student loan FICO -20pts

[Credit_hawk]

Hey guys, I paid off my student loan and my FICO dropped 20 points. I remember reading some people claim this wouldn’t happen because it stays on there for 10 years before falling off or something. That wasn't the case, haha.

Anyway, I just paid it off last month and it reported closed. So, what’s the best thing? Should I leave it alone? Get an installment loan and pay it down and let it sit? Or what ? I heard Alliant won’t allow the savings secured loans anymore? Is this true?

Thanks for any information.

[Anonymous]

---

@Credit_hawk wrote:
Hey guys, I paid off my student loan and my FICO dropped 20 points. I remember reading for years some people claim this wouldn’t happens because it stays on there for 10 years before falling off or something. WRONG! Haha.

Anyway, I just paid it off last month and it reported closed. So, what’s the best thing.m? Should I leave it alone? Get an installment loan and pay it down and let it sit? Or what l? I heard Alliant won’t allow the savings secured loans anymore? Is this true?

Thanks for any information.

---

Has nothing to do with a closed account staying on your reports for 10 years.  I'm sure your studnet loan still shows.  Your score dropped because you paid it off which is a known way for FICO scores to drop,especially if it's your only installment loan.  FICO scores are optimized when you have  a mix of credit types which includes open installment loans.  The same score drop happens to people who pay off auto and personal loans for example.  Not sure about the Alliant secured loan but I'm sure @Anonymous knows the answer.

[Anonymous]

Alliant still works fine, as long as you get their unsecured loan.  This thread summarizes the current known alternatives to the Alliant SSL.

https://ficoforums.myfico.com/t5/General-Credit-Topics/The-Quest-for-an-SSL-alternative-to-Alliant/t...

[SouthJamaica]

---

@Credit_hawk wrote:
Hey guys, I paid off my student loan and my FICO dropped 20 points. I remember reading for years some people claim this wouldn’t happens because it stays on there for 10 years before falling off or something. WRONG! Haha.

Anyway, I just paid it off last month and it reported closed. So, what’s the best thing.m? Should I leave it alone? Get an installment loan and pay it down and let it sit? Or what l? I heard Alliant won’t allow the savings secured loans anymore? Is this true?

Thanks for any information.

---

1. FICO 8's algorithm penalizes you for having no open installment loans; other FICO scores react differently. Some of the mortgage scores don't react at all. Although there has been a great amount of discussion in this forum on the effect on FICO 8, there's been almost no discussion of the effect on other FICO scores.

2. There's no great way to replace it, now that Alliant's SSL is no more.

3.  If you think of replacing it with another loan, bear in mind you will be adding a new account -- which causes you to lose some points both in Average Age of Accounts and in Age of Newest Account -- and for some loans you will incur a hard inquiry, which costs points too.

[Anonymous]

SJ, it's worth noting that the pieces of information discussed in point 3 of your post above don't necessarily have to lower score.  Opening a new account will definitely cause someone to lose age of their AAoA and AoYA, but that doesn't mean they will lose points if no thresholds are crossed in the process.  The same goes for an inquiry.  It's possible to lose no points at all from the addition of a single inquiry, but it all depends on the profile in question.

[HeavenOhio]

Closed loans no longer contribute to your credit mix, which is where you would have lost your points. But they still contribute to your positive payment history and file thickness. And they may prop up your account age stats.

[Credit_hawk]

Hey, thanks for all the responses guys! Sorry I've been tied up the past week. Thank you for explaining the loan options. I am a member with Alliant. It's too bad they got rid of their SSLs. The FICO mix drop took me from 790 to 769. I'm thinking of just getting an unsecured loan. It seems the best rate Alliant has for an unsecured personal loan is 10%? Coincidentally, I logged into my AMEX account today and a banner popped up telling me I'm pre-approved for a personal loan @ 8.98%. I would take $5,000 out and pay it down to maybe $1,000 and make payments for a year or two. Thoughts? Is Alliant unsecured still better than AMEX?

Thanks guys!!

[Anonymous]

Paying down a $5000 loan to $1000 may only yield around half the possible points that would be achieved compared to taking it down to under 8.9%, or under $445.  If you were to take it down to that amount, you'd be paying around $40/yr in interest to have that loan.  To me, that isn't worth it compared to a SSL where you pay at most a few dollars in interest over the life of the loan.

Also the question to ask is if you make a dramatic paydown on an Amex person loan, do they push your payment due date way out into the future, or do you still have to make a payment every month?  If they allow you to push it way out (years, allowing you to take the loan to full term) you could pay it down to say $40 rather than $445-$1000 and treat it the way you would a SSL.  8.98% on $40 wouldn't be the end of the world.  I wouldn't think that Amex would allow you to do this though, or it would definitely be considered a viable option to the SSL.

[Anonymous]

In the Quest for An Alternative To Alliant thread, we recommend a $500 unsecured loan from Alliant as one of the three alternatives we have found to the SSL.  Just pay it down to under 8.9% and make sure the interest never causes it to go over that.  (Pushing $1 monthly from an external checking into your loan account will certainly do the trick.)

[Credit_hawk]

Hey guys thanks for getting back quickly. When I say 8.9% I’m talking about the APR not the percentage of loan paid. I have a lot in savings and I’ll pay it down to whatever I need to.

I meant simply that AMEX offered me a loan at 8.9% APR. I agree that I wonder if I pay a large chunk off if they’ll not bill me for months but I suspect they will and then it becomes pointless as the loan will be paid off in a few months rendering it useless.

Dixie, how long can I get that from Alliant? Will they do $500 for 60 months? I assume you mean that they have a repayment system where if I pay $400 back I don’t have to make a payment for months if not years?

Thanks again.