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How can my credit score drop after paying off an account?

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How can my credit score drop after paying off an account?

Old 07-04-2015, 07:07 PM
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Default How can my credit score drop after paying off an account?

We were down to 5 payments on my wife's car so we decided to pay the $2700 payoff. I am a FICO member and I just got notice that my credit score dropped 8 points and the reason was "account balance paid off." I am really anal about my credit score so I check it at least once a week to make sure nothing weird gets on it. On FICO the top score is 850 and I was at 848 until I paid off the car loan, now it dropped to 840. Why?
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Old 07-04-2015, 07:35 PM
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Seriously get a hobby, anything over 750 is the same
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Old 07-04-2015, 07:39 PM
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It's normal.
It now shows a "Closed Account"...
The average length of your credit history included open loans, and when yours was closed, it is no longer included in it...which meant your average account age went down.
It will go back up.
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Old 07-04-2015, 07:43 PM
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Fico likes you to have outstanding debt paid on time.
Closed accconts and paid off accounts can lower score
Makes no sense to responsible people
Also they like to see longevity of accounts
I have had a account with Citibank for years and they closed for lack of activity .
Paid in full will probably lower my score last time I checked was 835.
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Old 07-04-2015, 07:49 PM
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Originally Posted by Saltydawg15 View Post
Seriously get a hobby, anything over 750 is the same
Perhaps to you it's the same. The last time I checked the lowest interest rate was for a score of 800 and up.

I do have a hobby, fishing and spending time on my boat but thanks for your concern.
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Old 07-04-2015, 07:51 PM
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Originally Posted by semperfifishing View Post
It's normal.
It now shows a "Closed Account"...
The average length of your credit history included open loans, and when yours was closed, it is no longer included in it...which meant your average account age went down.
It will go back up.
Fico likes you to have outstanding debt paid on time.
Closed accconts and paid off accounts can lower score
Makes no sense to responsible people
Also they like to see longevity of accounts
I have had a account with Citibank for years and they closed for lack of activity .
Paid in full will probably lower my score last time I checked was 835.
Well I guess I learn something new every day. I thought the least outstanding debt you had the higher your credit score.
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Old 07-04-2015, 07:53 PM
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Pretty much anything over 720 is about the same rate. Give or take 1 percentage point or less. Anything over 800 and its all the same. You always keep you longest credit card open and a low balance and makes payments. Zero balance for a while is ok but need to use it ever so often.
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Old 07-04-2015, 08:27 PM
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Close the account. A line of open credit with no debt is looked at as a liability.
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Old 07-04-2015, 08:38 PM
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That is not true on a credit card. Read up on how people get high credit scores. One of the main things is having a credit card with a zero balance or low balance. Shows payment history and shows you make payments on time. How do you think you get credit? Credit cards affect your score the most. I paid my 38,000 boat loan off my score went up 4 points. I paid $2,500 on my credit card to get it under a 50 percent ratio my score went up 20 points in a month. Its kinda a weird system. They want you to have just a few things on credit. Low balance on credit card and then your house and auto loan. Length of loans helps to. If you close out a credit card you had for a while that hurts your score. Better off keeping one.
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Old 07-04-2015, 09:04 PM
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Originally Posted by captain28570 View Post
That is not true on a credit card. Read up on how people get high credit scores. One of the main things is having a credit card with a zero balance or low balance. Shows payment history and shows you make payments on time. How do you think you get credit? Credit cards affect your score the most. I paid my 38,000 boat loan off my score went up 4 points. I paid $2,500 on my credit card to get it under a 50 percent ratio my score went up 20 points in a month. Its kinda a weird system. They want you to have just a few things on credit. Low balance on credit card and then your house and auto loan. Length of loans helps to. If you close out a credit card you had for a while that hurts your score. Better off keeping one.
This is what I always believed too. The only debt we have now is our house which we have 4 more years to pay on. I know to not close out credit cards so you keep a lower debt to available credit ratio.
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Old 07-05-2015, 02:39 AM
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Look at it in its most simple terms. You contractually agreed to do something with a bank but in the end, you decided not to fully abide by the terms of the agreement. It is/was regulators that mandated you the ability to pay loans off earlier than contractually stated without additional consideration paid to the bank, not the banks. Banks are in the business of lending money for profit.

If you were in the business of lending money and had 2 people before you, which one would you want to lend money - the person that would pay you back according to contract terms, or the person that would change the term in his favor if he could?

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Old 07-05-2015, 04:42 AM
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RussH, I hear you. I am very much like you and want to have a high score and no debt!

I personally check score once a month with my score sitting at 839 right now. It does make a difference. Coming out of college 19 years ago my credit was so messed up that I was refused a pre paid credit card so I take this crap seriously.

One thing that I have found with credit card balances that is true is what spler mentioned; a high line of open credit can be considered a liability. Around 2008/09 I had two credit cards that had limits of $25K. Neither one had a balance on them. One card was an MBNA card and the other a Citi card. MBNA called me one day to tell me that they were lowering my credit limit by 50% for my protection from fraud. They said that I could always call and get the $25K back, but for the time being I was limited to $12.5K.

When they did this my credit score went up 10 points.

When I bought my big boat last year I put $15K on the MBNA credit card for fuel and to bring it back to Florida and didn't call anyone to get the approval. I got a letter saying that my credit line had been increased back to $25K.

Needless to say with proper credit management is important but understanding how the game is played is just as important.
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Old 07-05-2015, 05:26 AM
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Originally Posted by slper View Post
Close the account. A line of open credit with no debt is looked at as a liability.
Not so sure about that. We closed a bunch of accounts from the last 30 years when ID theft became a regular item. Most accounts had been dormant for years, so they got cancelled.

Now our credit score shows something like, "...length of credit card history too short."


Not worried that losing points is important when being in the 100-200 range, but just sayin'

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Old 07-05-2015, 05:35 AM
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We can't get a credit score over 800, because we have zero installment debt. Our credit report shows zero late payments and zero outstanding loans. The report on our credit score from Discover says our score is lower because of two things:

- We have a balance due on our credit cards (which we have always paid in full, on time, every month).
- We do not have any long-term debt (and haven't for nearly 20 years).

So, apparently our credit score is lowered because we owe a little money to someone but don't owe anyone lots of money.

The only reason I care about a good credit score is that it lowers our insurance premiums. We are way above the score that produces the lowest premiums, so I don't fret over little wobbles in our score.
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Old 07-05-2015, 10:51 AM
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Originally Posted by yarcraft91 View Post
We can't get a credit score over 800, because we have zero installment debt. Our credit report shows zero late payments and zero outstanding loans. The report on our credit score from Discover says our score is lower because of two things:

- We have a balance due on our credit cards (which we have always paid in full, on time, every month).
- We do not have any long-term debt (and haven't for nearly 20 years).

So, apparently our credit score is lowered because we owe a little money to someone but don't owe anyone lots of money.

The only reason I care about a good credit score is that it lowers our insurance premiums. We are way above the score that produces the lowest premiums, so I don't fret over little wobbles in our score.
Our credit system is broken. I don't know my score and don't care. Screw 'em. Anyone who buys into the FICO crap as a good indicator is an asshole in my opinion.
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Old 07-05-2015, 11:11 AM
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Banks make more money if you follow the payment schedule. They make less if you pay off early. It also then requires a human to do something with the money at the bank, which requires expensive employees. If you follow the schedule, computers can do everything.

So bottom line is, when you pay off stuff early, it makes you a less desireable borrower in their eyes.
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Old 07-05-2015, 12:11 PM
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I picture your credit score being figured by an old crotchety actuary, that has a thing for teenage girls and hash.

The entire system makes no sense.
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Old 07-05-2015, 01:22 PM
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As a Citigold member, Citibank sends me an Experian, Transunion and FICO score and also a product called VantageScore monthly.
What is a Vantage Score, and why is it out of 900?
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Old 07-05-2015, 01:24 PM
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Your anal about checking your credit score but you don't even know why it changes. Russ Google is your friend.
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Old 07-05-2015, 01:38 PM
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You contractually agreed to do something with a bank but in the end, you decided not to fully abide by the terms of the agreement.

Howze do you get that? I've never had debt that precluded early payoff in the contract. Nor would any prudent borrower ...
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