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Posted in Auto Loans
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Question By
PURPLEMAXIMA

7 Contributions
110 People Helped
Car paid off credit score went straight south
My score dropped by -34 points, how could this happen? I don't understand how your credit score goes down so much when you work hard to pay off your debt? I'm not happy about this at all, I thought I was doing a good thing....NOT SO MUCH!

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Top Contributor
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Hi

Helpful to 34 out of 43 people

It doesn't make sense, but that's how it works. I guess when it comes to the credit game whatever you think would be the right thing to do, do the opposite. Any person with common sense would believe that paying off a loan shows a person to be a responsible and trustworthy person, but not to the credit bureaus and banks that run this country. I believe why you see the lower score is due to closing an account and that hurts credit scores. I almost made the same mistake recently. I was ready to pay a loan off in full to improve my credit and luckily for me I read an article the night before I was ready to do so and learned that it would be a mistake. To anyone reading this my advice is this: instead of paying a loan completely off, pay it down to almost nothing but keep the loan open, that will improve your score.

Reply by
grodd

2 Contributions
27 People Helped
Helpful to 27 out of 29 people

I had paid off my my credit card and the same thing happened to me. Very disappointing. Then I realized the reason was because this was my oldest debt and once it was paid, my payment history now showed my oldest credit debt to be 3 years, as opposed to 9 years. The credit bureaus like to see an older credit history, as that shows them you have been responsible in repaying your debt for a longer amount of time.

Reply by
QuikWgn

1 Contribution
5 People Helped
Helpful to 5 out of 7 people

I had been paying child support for 19 years. They reported it to the credit agencies like a loan.  Once my support obligation was through I finally decided it was time to buy a nice car with the money that had been going to support.  Same thing occurred.  I lost my oldest account and lost 7 years of credit history and I had never been late or missed a payment.  I lost 57 points at one credit bureau and 60 points at the other and though my debt to earnings ratio is less than 3% I can't get qualified for a car loan.

Reply by
ct1211

2 Contributions
10 People Helped
Helpful to 9 out of 9 people

None of you are "losing anything buy paying off a debt - Period! This whole FICO credit score Vantage credit score idea is to make money off of you and me! Yes you will lose 35 points for this or that. close a credit card whatever. Keep a mix of credit cards, use them all twice a year for a tank of gas, pay the bill off when it comes in and move on. You'll be fine. Dont close unused cards, do as above. stay out of  debt. 

6 Contributions
24 People Helped
Most Helpful Response

Score Drop

Helpful to 9 out of 10 people

I, too, recently paid off a student loan that just so happened to be one of my oldest accounts.  The loan company listed the account as paid in full and then removed it!  :(  I was so disappointed about this AND my credit score dropped.  I hope that it won't take long to get my score back up.

3 Contributions
0 People Helped

This is not unusual

The reason the credit score drops is because the reporting agencys now see this as a closed account. The drop is because the "Total Acounts" field drop by one, "Open accounts" drop by one, the years of the credit being on your report is gone. and many more factors.

Please remember, the drop will be only temprary. After a few months it should rebound back up.

Good luck and GOD bless.

1 Contribution
0 People Helped

Sapphire

Helpful to 0 out of 1 people

Seems to me paying a loan off ahead of time,Ya should be rewarded instead of pentlized?

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