Experian FICO Dropped 29 Points!! WTH?

[tps7c]

Hi guys! Just wanted to see if I could get some opinions. I received an email from Experian saying my FICO score had dropped, so I logged in and saw it dropped 29 points in one day, down to 783. I knew it wasn't a collection or anything like that, but it didn't have a reason. There are only two things that I can think of that might have caused it:

 

1) I applied for a car loan a few weeks ago and now have three inquires in total on my Experian report. 

2) The dealer paid off my auto loan and Chase just reported it as closed/paid the other day, and that was my only installment account. The new auto loan isn't on my report yet, so maybe this hurt my "credit mix"? (I don't have a mortgage so again, the auto loan was my only installment account. 

 

Any ideas fellas? (or ladies!)

 

Thanks!

[Kat58]

1) Definitely not the inquiries.

2) The pay off of your one and only installment account is why.

 

[MP80]

I lost exactly 25 FICO points on my Experian report since PenFed updated my Defender card to zero balance with the bureau.

 

I am sure that the GM and Venture balances were to be reported as scheduled, but the GM balance was updated to zero, which sounds crazy since I paid it after the statements were closed, and I thought it would report a balance. Of course, Capital One always reports late to Experian, so all accounts reported on Experian now have zero balances.

 

You don’t want to be penalized for paying off all your debt, but FICO measures how you handle your debt, and if you pay off your auto loan, you’re going to lose about 25 to 30 FICO points given that you lack installment loan. You will need to apply for a new installment loan (and paid off 90-91 percent) to make up for your lost points. It’s a system built for debt that favors lenders.

Edited May 24, 2025 by MP80
ETA

[Flyingifr]

8 hours ago, tps7c said:

Hi guys! Just wanted to see if I could get some opinions. I received an email from Experian saying my FICO score had dropped, so I logged in and saw it dropped 29 points in one day, down to 783. I knew it wasn't a collection or anything like that, but it didn't have a reason. There are only two things that I can think of that might have caused it:

 

1) I applied for a car loan a few weeks ago and now have three inquires in total on my Experian report. 

2) The dealer paid off my auto loan and Chase just reported it as closed/paid the other day, and that was my only installment account. The new auto loan isn't on my report yet, so maybe this hurt my "credit mix"? (I don't have a mortgage so again, the auto loan was my only installment account. 

 

Any ideas fellas? (or ladies!)

 

Thanks!

Only 29 points lost because you paid off your car loan? Count your blessings, when I paid mine off I lost 40 points.

 

FICO absolutely HATES people with no debt, because they market their magic number panacea as a probability that the debtor will make their NEXT payment on their debts. No debt? Then no next payment. No next payment means the probability of paying it is Zero, which reflects a lower score.

 

For Pete's sake, don't pay off your mortgage. When I did that I lost 60 points.

[tps7c]

Thanks so much for the info everyone! So based on what you said above, I'm hoping the score will go back up once the new auto loan reports in a few weeks. I realize it probably won't go back to the same score until I pay the loan down about 10%, right?

 

Thanks again!

[swingline]

As others have said, the big hit was paying off the car loan. Though applying for the new car loans probably dinged you a bit too. Good news is generally all car loans inquiries within 30 days count as one. So if someone else were in your shoes, they would want to finish the new loan the next couple of weeks and not over 30 days from the first inquiry. But you already have one, so you're fine. 
 

As others have said, they hit you worse if you pay off a mortgage. But you don't have to have a mortgage or car loan to have great credit scores. And also your score will bounce bank after a several months. 

 

myfico.com is 837/850 and I don't have any vehicle or mortgage loans.

 

Your best compromise if you really want to pay off something because of the interest, but can't afford the credit score hit at the moment, is to pay it way down and keep it open with a low balance. BUT -- if you can stomach ripping the band-aid off, the hit you take from paying of a mortgage or a car will rebound. Just be strategic about when and how you do it.

 

Once the new car loan settles in, your score will probably bounce back to similar to where it was, unless your debt ratio is wonky.  What does your overall debt to available credit look like?  

 

Congratulations on the new car, what did you get and what terms?

 

 

Edited May 24, 2025 by swingline

[ShawnPY1972]

On 5/23/2025 at 8:26 PM, tps7c said:

Hi guys! Just wanted to see if I could get some opinions. I received an email from Experian saying my FICO score had dropped, so I logged in and saw it dropped 29 points in one day, down to 783. I knew it wasn't a collection or anything like that, but it didn't have a reason. There are only two things that I can think of that might have caused it:

 

1) I applied for a car loan a few weeks ago and now have three inquires in total on my Experian report. 

2) The dealer paid off my auto loan and Chase just reported it as closed/paid the other day, and that was my only installment account. The new auto loan isn't on my report yet, so maybe this hurt my "credit mix"? (I don't have a mortgage so again, the auto loan was my only installment account. 

 

Any ideas fellas? (or ladies!)

 

Thanks!

 

I just refinanced my car and now that my car shows paid off my score dropped by 30 points.

[Flyingifr]

Like I said previously, FICO doesn't like paid loans.

[shifter]

10 hours ago, Flyingifr said:

Like I said previously, FICO doesn't like paid loans.

That's not really the case. You can have 100 paid loans that don't impact you negatively. If you pay off your only installment loan, you will lose points. It's similar to having a zero balance on all your credit cards.

 

FICO is a risk model. Individuals who use their credit and pay on time are a lower risk than those who don't use their credit. It's not some grand conspiracy to encourage you to pay interest. 

[Flyingifr]

13 hours ago, shifter said:

That's not really the case. You can have 100 paid loans that don't impact you negatively. If you pay off your only installment loan, you will lose points. It's similar to having a zero balance on all your credit cards.

 

FICO is a risk model. Individuals who use their credit and pay on time are a lower risk than those who don't use their credit. It's not some grand conspiracy to encourage you to pay interest. 

I never said or implied it was a grand conspiracy to encourage the payment of interest - I just stated that FICO hates paid off and zero-balance accounts, which you apparently agree with. As you so aptly said, "If you pay off your only installment loan, you will lose points. It's similar to having a zero balance on all your credit cards."

 

I paid off my mortgage and lost 60 points. Within 2 months I paid off my car loan and lost 40 more. No debt, $1500 a month more in my pocket and my FICO score was instantly trashed. It took a long time (over a year) to get those 100 points back without re-borrowing.

Edited May 29, 2025 by Flyingifr

[swingline]

7 hours ago, Flyingifr said:

I never said or implied it was a grand conspiracy to encourage the payment of interest - I just stated that FICO hates paid off and zero-balance accounts, which you apparently agree with. As you so aptly said, "If you pay off your only installment loan, you will lose points. It's similar to having a zero balance on all your credit cards."

 

I paid off my mortgage and lost 60 points. Within 2 months I paid off my car loan and lost 40 more. No debt, $1500 a month more in my pocket and my FICO score was instantly trashed. It took a long time (over a year) to get those 100 points back without re-borrowing.

 

This is the truth. And people who've experienced this know that recovering from the hit on mortgage and auto loans takes awhile unless there is another mortgage or auto loan that replaces it. If it is replaced, you can usually recover most of the points when the new one hits.

 

Credit mix is an important factor in the scoring model and while you CAN have great scores without mortgage or auto loans, the scoring models do punish you for paying them off versus paying of a credit card. 

 

People who know -- know. 

 

 

 

[overtun333]

Gotta love a system where being financially responsible actually dings your score. FICO out here like, “Oh, you paid off your debt? Disgusting. Here’s a penalty”.

[swingline]

23 hours ago, overtun333 said:

Gotta love a system where being financially responsible actually dings your score. FICO out here like, “Oh, you paid off your debt? Disgusting. Here’s a penalty”.

 

The credit reporting system is set up to prey on and exploit consumers, not help us. Their customers are the people who buy our data, and they don't really care about them either. 

[hdporter]

7 hours ago, swingline said:

 

The credit reporting system is set up to prey on and exploit consumers, not help us. Their customers are the people who buy our data, and they don't really care about them either. 

 

 

You solidly nailed that conspiracy.

[swingline]

16 hours ago, hdporter said:

You solidly nailed that conspiracy.

 

I was just messing around to see who might fall for it, but you've shamed and insulted me into the Truth:

 

The Credit Bureaus are your friends and are doing everything they can to serve you as their customer. 

[Flyingifr]

20 hours ago, swingline said:

 

I was just messing around to see who might fall for it, but you've shamed and insulted me into the Truth:

 

The Credit Bureaus are your friends and are doing everything they can to serve you as their customer. 

Yeah - and Congress passed the Fair Credit Reporting Act because of all those favors and rewards Credit Bureaus where handing out. I remember that - and one name from those hearings stood out as the reason for FCRA - "Credit Bureau of Atlanta".