Score declines with payoff

[Lushi]

I paid off my auto loan, and my score dropped 19 points. Recently, I also paid off all credit card debt. Will this also result in significant point decline? I have two student loans outstanding, nothing else. What's the best way to recover 19 points?

Thank you!

[Anonymous]

Yes paying off all of your last installment loan and/or paying off all of your CC debt will result in a score decline.  You still have student loans, so since you still have that part of credit mix satisfied I'd say that your installment loan utilization probably went up quite a bit in closing out the auto loan; you probably had very low utilization on the auto loan right before paying it off, which lowered your overall installment loan utilization.  After paying off the auto loan, especially if your student loans have high balances still relative to their original balances, installment utilization likely rose which is why your score dropped some.  No real way to get those points back except to pay down those student loans.

As far as CC's go, just let one of your revolvers report a small balance of 1%-9% of the credit limit every month and you'll maximize your FICO points there.

[SouthJamaica]

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@Lushi wrote:

I paid off my auto loan, and my score dropped 19 points. Recently, I also paid off all credit card debt. Will this also result in significant point decline? I have two student loans outstanding, nothing else. What's the best way to recover 19 points?

Thank you!

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I'm skeptical that paying off the auto loan would drop your score while you still have student loans outstanding, and suspect that it was the paying off of the credit cards that caused the loss in points. If I'm right about that, the easy way to get those points back is to let one of your credit cards report a small balance while the others continue to report at zero. Having all credit cards at zero reduces one's scores.

[Revelate]

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@SouthJamaica wrote:

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@Lushi wrote:

I paid off my auto loan, and my score dropped 19 points. Recently, I also paid off all credit card debt. Will this also result in significant point decline? I have two student loans outstanding, nothing else. What's the best way to recover 19 points?

Thank you!

---

I'm skeptical that paying off the auto loan would drop your score while you still have student loans outstanding, and suspect that it was the paying off of the credit cards that caused the loss in points. If I'm right about that, the easy way to get those points back is to let one of your credit cards report a small balance while the others continue to report at zero. Having all credit cards at zero reduces one's scores.

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Depends what the ratios are on the student loans.  Wasn't enough information to pin it down, could be that alone, could be both.

[Anonymous]

In most cases, paying off an installment loan more often than not is going to raise overall installment loan utilization which could result in a score decline.  The exceptions to this are if the loan being paid off is still very new and has high utilization but you come up wtih a way to just pay it off in a big lump sum... this way you are eliminating a loan that was at high utilization.  The other exception which is related to the first is if the other installment loan(s) you have is very close to being paid off (low utilization).

I was assuming (and only because it's the most probable situation) that your auto loan is at very loan utilization now as that's the state they are usually in just prior to being paid off and that your student loans were at higher utilization levels.

[SouthJamaica]

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@Revelate wrote:

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@SouthJamaica wrote:

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@Lushi wrote:

I paid off my auto loan, and my score dropped 19 points. Recently, I also paid off all credit card debt. Will this also result in significant point decline? I have two student loans outstanding, nothing else. What's the best way to recover 19 points?

Thank you!

---

I'm skeptical that paying off the auto loan would drop your score while you still have student loans outstanding, and suspect that it was the paying off of the credit cards that caused the loss in points. If I'm right about that, the easy way to get those points back is to let one of your credit cards report a small balance while the others continue to report at zero. Having all credit cards at zero reduces one's scores.

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Depends what the ratios are on the student loans.  Wasn't enough information to pin it down, could be that alone, could be both.

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Good point

[SouthJamaica]

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@Anonymous wrote:

In most cases, paying off an installment loan more often than not is going to raise overall installment loan utilization which could result in a score decline.  The exceptions to this are if the loan being paid off is still very new and has high utilization but you come up wtih a way to just pay it off in a big lump sum... this way you are eliminating a loan that was at high utilization.  The other exception which is related to the first is if the other installment loan(s) you have is very close to being paid off (low utilization).

I was assuming (and only because it's the most probable situation) that your auto loan is at very loan utilization now as that's the state they are usually in just prior to being paid off and that your student loans were at higher utilization levels.

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Good point

[Lushi]

Thanks, all! After posting, I did a considerable amount of research, and am almost positive that the reason for the drastic drop in points is that my student loans have a high balance $180,000, and the only other installment that I had (car at $15k), was paid off. I was also able to pay off all of my credit card debts, but will be sure to keep a small balance of between 1% - 9% in play.

[SouthJamaica]

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@Lushi wrote:

Thanks, all! After posting, I did a considerable amount of research, and am almost positive that the reason for the drastic drop in points is that my student loans have a high balance $180,000, and the only other installment that I had (car at $15k), was paid off. I was also able to pay off all of my credit card debts, but will be sure to keep a small balance of between 1% - 9% in play.

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What was the original amount of the student loans, and what was the auto loan balance just before the payoff/score drop?

[Lushi]

The original amount of the auto loan was $35k but $15k at payoff. Student loans approximately $200k originally, but $180k now.