Possible FICO score drop...WTW

[frugalQ]

Hubby and I are building a house that will not be ready until March 2015. On his credit, he has the following installments: two autos, a mortgage and 1 student loan. We just paid off one auto early to minimize our DTI (the final car payment was closer to close date). The loan closing hasn't posted, but the mortgage company ran their models and it shows that paying this car off will DROP his Experian score by more than 20 points. It would not harm the other two reports.

Why in the world would this action hurt his score? I am on pins and needles because experian is his middle score and this will drop him below 700....which is the score we need.

Someone please help me understand why a responsible financial decision can possibly cost us our dream house??!!!

The problem can't be credit mix...there's still a mortgage, another auto loan, and a student loan reporting open without any negative marks.

I will buy his scores again once the account update, but I'm just sick right now.

[vanillabean]

I’m not sure what they mean by running their models, but you can’t know anyone’s FICO score without actually doing a credit pull, so that’s bogus. There is however some logic to not paying off a credit obligation any sooner than you have to, because once paid you are no longer actively showing responsible use of credit. But that usually pertains only to the last of installment loans and the last of credit cards.

[frugalQ]

Mortgage companies have departments that use simulations to estimate credit scores for mortgage purposes.

I agree that it's all speculation, but it's common practice in the mortgage industry. My loan officer and I are praying that it's incorrect.

To have this derail our loan is devastating.