Question regarding score drop

[Anonymous]

I took out a new car loan recently and it caused my score to go from 667 to 640.  Why such a huge decrease?  I only have 1 credit card with a $300 limit balance $0, a small personal loan balance of $450, a student loan for $43000 and now this loan for $11k.    Will it start to increase as I pay on it on time every month?  This just scares me because I want to apply for a mortgage in 14 months and want my score to get higher.  Now this is just my equifax score.  Is it true that Equifax is the lower of all 3 scores? For me it always has been.  When I apply for my mortgage I know they take the middle score so I am not doomed yet.

Thanks for your help

Jaye

[Lel]

There's a number of reasons why your score dropped after the opening of a new account.  The new account (and its inquiry) tend to have a negative effect on a person's score.  In your case, since you have a thin credit file, the new account also had a greater effect on your average account age than it would on someone who has >20 tradelines, for example.

It is not true that Equifax is always the lowest of your 3 scores.  It varies from person to person.  Sometimes it's because there is different information contained at each credit bureau, but it's possible to have different scores with identical information, because the formulas used by each bureau are slightly different from each other.  In my case, Transunion has always been the lower score.

[MarineVietVet]

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@Anonymous wrote:

I took out a new car loan recently and it caused my score to go from 667 to 640.  Why such a huge decrease?  I only have 1 credit card with a $300 limit balance $0, a small personal loan balance of $450, a student loan for $43000 and now this loan for $11k.    Will it start to increase as I pay on it on time every month?  This just scares me because I want to apply for a mortgage in 14 months and want my score to get higher.  Now this is just my equifax score.  Is it true that Equifax is the lower of all 3 scores? For me it always has been.  When I apply for my mortgage I know they take the middle score so I am not doomed yet.

Thanks for your help

Jaye

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You have a new inquiry and a new loan. Both tend to lower a score a bit. As time goes by and you keep up on payments it will go up. The inquiry will have no effect after one year. Some people report no ding because of one inquiry.

As backward as it seems you might be getting a small hit if you don't let any balance show on your CC each month. FICO likes to see usage but not too much. Let no more than 1-9% of utilization of your available credit show on your statement each month and then pay in full before the due date to avoid interest charges.

Do you have any negative items such as late payments, charge off, collections, etc.? If you do how old are they? Getting those removed is a good thing.

Good luck on the mortgage.

From a BK years ago to:
7/09 TU-742 EQ- 779
8/09 TU-765 EQ- 783
9/09 EX pulled by lender 802

You can do the same thing with hard work.

Message Edited by marinevietvet on 01-09-2010 09:41 AM

[Anonymous]

I would say after about 6 months of on-time payments, you'll see the score even out and/or gain points due to the auto loan.  Overall, the auto loan will benefit you (credit-wise not financially) down the road.  I've been reading a lot about mortgages that have upped their low score from 620 to upwards of 700+ now.  Prior to applying for a mortage, I plan to get my scores up to the 740 range.