Nothing to dispute. It's common to lose points when you pay off a loan -- especially if it was the only active installment. Basically - FICO offers bonus points when you pay down loans by a certain percentage, but still have a balance (below 8.9% of the original loan amount yielding the largest boost). When you pay it down to $0 and the account closes -- you lose those bonus points you gained from the previous paydowns. You still, however, retain the 'credit mix' points for simply having an installment in good standing on your reports.
If you have more than one installment, and one closes, this can sometimes increase your installment utilization - which can also result in a point loss. Installment utilization is not calculated on an individual basis -- it's aggregate. So if closing one loan causes your aggregate installment util to increase, you can lose a few points.
@Tomew2000 wrote:Hoping this is the correct forum. I paid a $50K loan off in Jan, and my experience score dropped by 16 points, noting the change in my accounts on this site. Is that normal? Should I be disputing that?
I'm sure there's nothing to dispute, but in order to know whether it was "normal" I would need to know whether it was your only open installment loan before you paid it off, and if not what your other installment loan balances and loan amounts were.
I'm assuming you're talking about your FICO 8 scores.
@Tomew2000 wrote:It's not my only installment, by far unfortunately. There's 5 others. That said, I actually paid off two loans this month, so that's coming down. Just don't understand losing points for paying off loans!
It's got to do with your installment loan utilization percentage
When you close out a mostly paid off loan you lose that size loan from the denominator, causing the percentage to go up
it negatively impacts FICO 8 & some other
scoring models
it has little or no impact on mortgage scores
i agree that it makes no sense