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DCR143

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Loan payoff lowered credit
I had a home mortgage and two personal loans, when I came into a large sum of money I promptly paid all my loans off. Much to my surprise my payoffs all of which have remarks attached saying I was never late, lowered my score about a hundred points. Why is this and can I do anything to fix it?

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Your score went down

becuase you paid off your loans.  Yes, paying off your debt can lower your score because it reduces the number of open accounts you have and reduces your available credit. 

You can counteract this by opening a Home Equity line of credit.  Uses the equity in your now paid off home as collateral.This is basicly a a pre approived loan that you can access when you need it, but theres no payments if you don't need the cash.  Contact your banks loan manager for more info on how they work.  This would replace the mortgage loan that was paid off.

Good luck

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Exactly what happened to me

This morning I was shocked to see that my score dropped 88 points after paying off a loan.  My credit was good, approaching excellent.  Now I'm back down to FAIR.  In any event, I'll continue on my course to be debt free in a year (excluding my mortgage) and hope that my score recovers quickly.  Right now paying off debt is what's most important to me.

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