Score drop after paying off loan

[Anonymous]

My credit score has dropped 12-15 points this month. I did have two vehicle loans on my report but sold one last month and paid the loan off.
I have one vehicle loan still reporting on my report. I do have one credit card reporting with a small balance. So besides paying off one of the car loans nothing else has changed on my report.
So why did I take such a big hit on my score??? Kind of feel defeated paying off a 23k loan and getting hit on my score.

[SouthJamaica]

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@Anonymous wrote:
My credit score has dropped 12-15 points this month. I did have two vehicle loans on my report but sold one last month and paid the loan off.
I have one vehicle loan still reporting on my report. I do have one credit card reporting with a small balance. So besides paying off one of the car loans nothing else has changed on my report.
So why did I take such a big hit on my score??? Kind of feel defeated paying off a 23k loan and getting hit on my score.

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One would need to know your other loan amounts and the balances.

If you have 2 loans and pay 1 off, it might increase your installment utilization percentage which might cause a point drop in FICO 8.

E.g., A has 2 auto loans, each for 10,000. 1 is paid down to $1000, the other is paid down to $5000. A's overall installment utilization percentage is 6000/20,000 = 30%. A pays off the loan with a $1000 balance. Now, A's overall installment utilization percentage is 5000/10,000 = 50%. This might cause a point loss in FICO 8.

[Anonymous]

Paid off 23k original amount was 26k. The loan that is still on there had original amount off $12900 with a balance of $6900.
Thank you

[SouthJamaica]

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@Anonymous wrote:
Paid off 23k original amount was 26k. The loan that is still on there had original amount off $12900 with a balance of $6900.
Thank you

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All right, then that's not a factor, because you improved your overall installment utilization percentage, moving down from 29900/38900 or 76.8%, down to 6900/12900 or 53.5%.

So it's got to be something else.

[RobertEG]

When you pay off a delinquent debt, the date that you pay updates the balance to $0, but it also updates the effective period since initial delinquency from the last reporting date to the current reporting date.   Thereafter, there can be no continued reporting of delinquency status, but the update to Paid current status is also a reporting that the debt was delinquent up to that updated reporting.

Thus, it is common for a Paid update to have a negative effect on payment history scoring of the current delinquency period.

The good news is that any subsequent reporting will already have a prior current status of non-delinquency, and thus the period of delinquency is terminated by the date you paid.

[Anonymous]

Thanks for the answer Robert but the loan had never been late. I don’t have any lates on my report at all.