Score went up 2 points after car loan paid off

[Emyshor]

Hi all, 

My score went UP 2 points after I've paid off my car loan. Wasn't supposed to go down?

I don't really care since the score is 810+ for all 3, but was weird to see score going up.

I still have a second car loan (plus right now shows 4 car loans closed) and a mortgage, also about 10 credit cards all reporting $0.

[Anonymous]

Since you have another open car loan, your score would typically not drop from paying one off. Your score may have ticked up a few points due to having one fewer account with a balance.

You say you have 10 credit cards with $0 balances. Do you have a non-zero balance reported on any card? If not, allowing a small balance to report on one of them would likely yield you a 15-20 point gain.

[Emyshor]

Thanks for the info.

It's not really $0, every month I have one card reporting $100-$200, but always paid off and never paid a cent in interest. I try to rotate the cards, don't want to have a card closed because it's no activity. So far, the only thing afecting my score is "too many inquires" and "too many new accounts".

I've got about 6 new cards in the last 2 years, with the oldest cards having 14 years (Wells Fargo) and 12 years (Amex).

[Anonymous]

Here's a scenario where a person would gain scoring points purely from paying off a loan.

Bob takes out a 5-year 50k auto loan.  At month 12 he still owes 41k.  Also at month 12 he has a 1k personal loan, on which he owes $85.  He gets a big windfall and decides to pay off the 41k car loan (possibly because it had a high interest rate, possibly so that he could save money on insurance, etc.).

His score will go up substantially, at least 20 points.

Paying off a loan sometimes raises your score, sometimes lowers it, sometimes has no effect.

The only way to make a rational assessment is to see a list of all the OP's installment accounts (loans, car leases, furniture financing at rooms to go, etc.).  We'd need the balance and original loan amount for each.  We need this as it appeared on the credit report just prior to the payoff. 

Then we can compute the total installment utilization both before and after the payoff.

[Emyshor]

Thanks CreditGuyInDixie for the information.

Right now, my mortgage has a balance of $150K (original loan was $190K in 2010). My other car loan has a balance of $9800 (original was $25,500). The one that I've closed was opened just 6 months ago and at the seven month I've paid it off (original was $24,600, balance left when was paid off: $23,100). On the report right now I have 4 car loans paid, since 2006, all paid on time, never late.

I don't have any other loans, just credit cards.

[Anonymous]

If we consider the non-mortgage loans by thenselves, the utilization went from 66% to 38%.  The FICO reason codes can arguably said to imply the possibility that mortgage and non-mortgage debt might be considered differently.  So that might be the reason for the modest point gain -- FICO likes it when your non-mortgage loans are mostly but not entirely paid off.

[Emyshor]

I was thinking to pay off the other car loan also (I have the money), but I'll leave it open for now.

If I decided to pay it off, the score will go down, right? Since will be no other loan with balance, even will show on the report "closed" and already have 4 more car loans closed.

[Anonymous]

I recently closed my only open auto loan and with a mortgage still present I lost about 5 points on average from my FICO 08 scores.

[Anonymous]

I'd contact the lender (or loan handler).  Suppose you were to pay off a huge chunk of the remaining balance.  You owe $9800 on that 25k loan, so suppose you paid an additional $8000 off.  Some lenders would push the due date of the next payment way into the future, e.g. at least a year.  Others would thank you for the big payment but would say that the due date of your next payment is still next month. 

If you have the first kind of lender, you can pay the loan down to a little bit more than whatever your monthly payment is.  Then you can keep it open for the full loan term and pay very little interest.

With the other kind of lender, an early paydown will cause your loan to get paid off much earlier.

The other thing to consider is that paying off a car loan gives you the option of liability only insurance coverage.  If you think that would be attractive, then paying off the loan is a good thing to do.

Paying off the loan is a bad choice IMO if it reduces the amount of money you can put into your Roth IRA or 401k, though if the auto loan has a very high rate it can still be a good choice.

[Emyshor]

The loan left is from Toyota Financial and I did it with another car loan from Toyota Financial. When pay more they will move the next payment date. I'm still undecided, but I can leave a small amount (maybe $500) and pay the rest of the loan.

Thanks everybody for informations.