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Student Loan finally paid off, why did FICO drop 20 points????

joshso
New Visitor

Student Loan finally paid off, why did FICO drop 20 points????

I recently made the final payment on my student loan...nothing has defaulted or been late.  Now all of a sudden my FICO score dropped 20 points due to this change.  It lists the debt as zero balance with no past due payments.  Should this have happened?

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aav
Established Contributor

Re: Student Loan finally paid off, why did FICO drop 20 points????

Yes, 10% of your score is based on having a mix of credit types - (mortgage, student loan, auto loan etc.) when something drops off, it changes the dynamics. Having a good mix between installment and revolving loans shows lenders that you can handle different types of credi. I know from personal experience that it stinks. You accomplish the goal of paying something off and you get dinged.
EQ - 834 TU - 823 EX - 822
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heyitsyeh
Frequent Contributor

Re: Student Loan finally paid off, why did FICO drop 20 points????

Yep, this happened to me too, except it was 30-40 points across the bureaus. It's been 6 months and I still haven't quite recovered yet. I had to remind myself that being debt-free is far better than being credit-worthy. After all, who cares about how much borrowing power you have (what a credit score essentially is) if you don't have to borrow?

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Available credit: $200,600 (8 cards)
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