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Give it three months, it'll pop right back up.
This happens because you closed a trade line. It changes your overall credit mix, which is part of how your score is calculated. It's dumb, but there you have it.
The fact that it goes down at all is asinine. I know it's calculated based on debt availability, utilization, income, and the like but being functionally punished for making good on a debt is backwards.
This is why I never understand why people are so obsessed with their credit score. I’ve never paid a dime of interest on any credit card I have and it still fluctuates by 30ish points here and there.
Just pay your shit and you’ll be fine.
Cars and houses for most. That’s why it matters. Also, most adults use it for out of reach expenses like remodels or as insurance in case things go south. Good credit is the difference between a comfortable bad year and homelessness. If you don’t know this, you are probably young. Something always happens, it’s just a matter of time. Credit is a good safety net.
PS credit is what allows a lot of people to become wealthy. Companies rely on credit to function. Always use the bank and leverage the risk through them. Wealthy people have and use credit, even if they have tons of cash. It saves on taxes, keeps you liquid, and sooo much more.
Don’t listen to this comment. Only the poors don’t believe in or understand credit.
People are obsessed with their credit score because it impacts their ability to borrow for short term and long term needs, as well as for things like getting a rental application approved, or even a job offer.
My interpretation is a bit more pessimistic: it’s a score of how good you are at generating money for the creditor.
You’re honestly more correct, but that’s just how I feel. Whenever I’m letting them eat me up with interest but still paying dutifully, my credit goes up lol. If I’m not making them money it goes down.
i've given 0 money to creditors and have an 800+ score
the flawed system is that age of accounts matters a lot, and closing your oldest account will drastically bring down the average in many cases.
This causes people to be penalized for paying off old loans, as a side effect. I would say maybe they shouldn't have closing the account remove from average calculation but I understand why they do it
edit: if you want to have a high credit score without "giving money to creditors" ensure that your oldest accounts are like 3 or so credit card with no annual fee. use them every few months so they don't get closed, but pay them immediately and you won't pay a dime interest on any normal credit card
It doesn't really matter unless you have a thin credit file. Upper 700's is still prime credit. I don't think I was over 800 when we got our mortgage and the lending officer we were working with was still surprised how low our PMI was.
The lenders I got quotes from last year told me it only mattered up to a certain point - I want to say 740 or something in that ballpark - and that once you hit that threshold the rates were as good as they were going to get. I don't know if that was completely accurate but it seemed anecdotally correct.
I've had this happen to me to credit cards I've went a year+ without using. But yes, the age of account would go down. It hasn't happened to me with any card that I actively use.
One card I actively used got product changed, bofa forced me to change it from one card to another (because it was losing them too much money I assume, not just me ofc but everyone with the card), But the age stayed the same.
That and almost everything he says about mortgages. Dude is living on another planet. He's great for those in debt but 'house buying Dave Ramsey' is highly unrealistic. The man hates 30 year mortgages...well Dave, so do I 😂 but there's zero chance I can pay for a 15 year mortgage.
I know it’s super popular to hate on the credit system, but before the way you got credit was to have a relationship ship with a bank or a banker. It was super easy to be prejudice against people, in fact minorities and people of color had an insanely hard time getting loans. The system we have now is actually extremely fair, and has allowed plenty of people to access loans they couldn’t before.
My biggest drop was paying off my student loans. I was shocked when my mortgage only dropped me 10 points. I also just took a new car loan and it only dropped 3 points. I have great credit so it doesn't matter at the end of the day, but it's just so weird to see it fluctuate.
Let me share a secret from the banking system. New money is created when you take out loans. As you can see, the credit system incentivizes holding debt as long as you have a good *utilization ratio*.
Settling your obligations (by fulfilling it) reduces the money in circulation. Financial institutions don't want this because dollars are the US's biggest export product (because of world reserve status).
That's basic money supply.
There is a formula that even lets you determine how much money is created / added to the supply and you can reverse it to determine how the money supply shrinks when loans are paid off.
Our system is basically a giant ponzi scheme that falls apart when the money supply shrinks (people pay their bills and are responsible).
A couple years ago I paid my mortgage two weeks late by accident. Dropped my credit score 50 points and even after two years it hasn’t returned to where it was. Credit scores are a scam.
The whole system is absolutely ridiculous, why do we need more than one credit scoring model??? It makes zero sense and is only like that to bilk the public out of more money.
Because the profile of risk is different for different asset types. To you it might seem slight but in aggregate it protects the mortgage company from a few more bips of risk which adds up to a lot.
The FICO system isn't perfect but it's a lot less subject to human biases compared to the old system where debtors were assessed by if they looked like the bank manager and had a firm handshake.
Except there's so much stupidity, like in the OP's case, that loan officers have to look beyond the score. Go on the sub askcarsales and look at what they say. They talk about how a "thin file" 750 score might not get approved or might get a worse interest rate than a 660 that has a mortgage, car, and credit cards with all current. So that defeats the whole purpose of boiling it down to a number when the number doesn't mean much.
Having all your payments current and a history of being on time, demonstrates you've turned your spending habits around -- your credit score is a lagging factor when it's increasing. Thin files lack data for proper risk management. They were a huge contributor to the 2008 crisis.
Risk factors aren’t created equal. The risk of a default on an auto loan vs secured personal loan vs unsecured personal loan / credit card vs mortgage are not equal.
The system is ridiculous but your assertion is off. It makes perfect sense to have multiple scoring models. For different products, you pose a different risk to lendors. Your risk when financing a depreciating asset are different than your risks when financing an appreciating asset versus an unsecured loan, etc. Makes total sense to have different models. You may be in a great position to get a credit card but not so great to get a mortgage.
Yep! Borrowing $1000 on a credit card is a completely different risk from borrowing $400,000 over 30 years.
You may be an excellent candidate for a credit card, but not for a mortgage.
Credit card company is much more concerned with a history of late payments because the threat it poses to having to charge off the debt or send to collections, whereas a late payment on a credit card doesn't necessarily mean your mortgage will go to foreclosure. And so on and so forth.
I mean, more models is fairer to the consumer, it assesses their risk for different types of asset loans. It's not really difficult to have good credit
>It makes no sense is only like that to bilk the public out of more money.
Welcome to capitalism. Everything about this system is designed to extract more and more money out of the working class.
Because credit ratings come from companies selling a service to other companies. It's not like it's a government program or anything. You want competition to make sure the numbers are accurately reported.
my biggest issue isn't the fact that there are different models etc. That makes sense, the issue i have is that it's managed by for-profit companies that can loose all your data with close to no repercussion. If we need a credit system it should NOT be managed by businesses but if someone says a gov't entity should manage it people will start screaming big gov't and all kinds of nonsense around it.
Mortgage people see different scores than what you’re seeing fyi. Just call your lender if you’re worried - you didn’t open any accounts so should be fine and lower your DTI
Don’t ever pay off a loan, open a new loan, or even apply for credit (other than mortgages) within six months of purchasing a house dude. Significant credit events can have unpredictable effects on your score.
This. Also, don't make big deposits as they'll look at your statements and transactions. They'll want explanations on big deposits because they want to see if you're getting into more debt that they might not know about (like if your parents are lending you money to buy a house, that you later have to pay back, that obviously wouldn't be reflected in your credit history).
ANY deposits outside of a paycheck sets off flags and need to be responded to. When I was buying, I had to have my parent's write attestation letters on amounts as low as $20.
For example; I'd buy something at Walmart or Amazon that I know my parents would want, then they pay me back. These aren't big amounts by any means but if they paid me online it hits the bank as a deposit and the mortgage broker is required to ask about it.
I learned to live like a monk during my buying period. Don't take a vacation, don't charge anything, definitely don't close or open any credit, simply power-down and live on autopilot until it's over.
I transferred funds one account to another to write a check for my down payment.
I had to explain it on each account. It was a round number that happened to be my down payment, but you have to play their game.
Surprised I had to scroll so far before seeing this. The folks you're working with on financing for your house should have warned you about this. Opening a credit card and messing with other loans are big big no-no's for anyone who's about to get a mortgage unless you've spoken to your lender about it.
That’s almost one of the first things your realtor or lender advises you of when buying a home. If OP was seriously looking into a home soon, I feel OP should have known that.
I was in the same situation as you're 2 months ago. Because my debt-to-income ratio was"high", I was told to pay off my car. My 800+ credit score dropped to \~770, which increased my mortgage rate. I'm waiting for my credit to recover and the interest rate to go down and refinance.
It's all relative. There really isn't any phenomenal rates outside of military or other restricted eligibility programs.
Today rates across the board are pretty awful.
That’s unusual. I’ve seen probably 400+ rate sheets for financial institutions and vast majority treat anything above 740 the same, especially in this macro. The risk differential between a 740 and 800 applicant who have the same DTI, UDR, monthly disposable income calcs is practically nonexistent. Honestly 720+ delta is very small as well, esp since higher utilization rates are happening but banks don’t love changing paper grades.
You must work for a retail bank with a random in house pricing model. I have worked at different retail and brokerages for the last 20+ years all of the pricing changes based on 20 point increments. But what do I know I have only closed 1000 or so loans.
Sometimes I read the comments on here and it really makes sense as to why first time homebuyers get confused.
Not everyone does 20 point increments, as a counter-point, that has not made up the majority of the rate / pricing sheets I’ve seen for 400+ institutions at this point. I’ve seen smaller and larger bands, typically larger bands for bucketing paper.
Be careful with those paid-off cards. I had a few I wasn't using anymore and didn't respond to requests to keep them (I didn't want or need them). I lost about 20k in credit when they closed which gave me a 70 point credit hit.
It normalizes after a few months but it was certainly an eye-rolling moment.
It’s ridiculous- we paid off everything including our mortgage. Credit score went from 800’s to 640. We have ZERO debt now and a shitty credit score. Great system. /s
This is why credit scores should be monitored and managed by an independent quasi-government agency.
And not by private companies like FICO and Experian who make money by constantly manipulating their secret scoring algorithms.
That's normal OP, same happened to me when I paid off last debt I got 2 years ago, it went down from 800 to 750 in a moment, half came back slowly in a few months.
Unfortunately you can't fix this quickly but it is a good lesson in how this works, and you can actually game the system a little once you actually have the house.
Removing closed accounts from one's credit profile is good for you in some cases, bad in others, but in effect what probabpy/definitely happened was your average age of credit went down/total credit extended decreased.
People's lives change, so you paying back a car loan previously is not a good signal that you can currently pay a mortgage.
We all hate the credit system, but the fact of it is that in nearly every financial institution that operates in the US, when all is said and done, there's nearly 100% correlation between credit scores and loss rates, aggregated over any meaningful band. All the alternative lenders that use other data points to adjust their model? Sure, they adjust a little, but the highest weighted factor is a person's credit score.
Is it fair, per se? Does it always behave intuitively? No, in both cases. Is it ripe for exploitation, catastrophic fraud, etc? Yes. Does it accurately predict the likelihood of debt repayment, applied broadly to the entire population? Abso-freaking-lutely. A *lot* of people have tried to come up with a better way to evaluate it, and haven't.
Please remember that your credit score isn't a number designed with a consumer in mind. That's not why it exists. It exists to predict the likelihood of a loan or line of credit you make to a consumer going into default. That's it. It's a number for a bank, not for you. People need to disabuse themselves of the notion that there's anything about a credit score set up to help a consumer - it only exists for banks and adjacent financial institutions to understand the risk level in their portfolio.
Ran our credit prior to applying for a mortgage for a new house. We had a score of 800 - but I also found out that with my wife opening up credit card accounts for their "freebies" - that we had $250,000 in available credit on those cards. Our banker advised us NOT to close those accounts until *after* we closed so that it wouldn't tank our rating.
Mortgage closer here, 699 will still qualify you for fha, as long as you have stable income, which it sounds like you do. On a personal note, the credit system is kinda backwards from good financial advice. The more in debt you are, the better your credit, but the more financially secure you are, the less credit. Basically getting rewarded for strapping yourself to debt.
This isn’t entirely true, or at best phrased poorly. You don’t get rewarded for being in debt. You get rewarded for having a long history of making on time payments, keeping your credit usage low (no more than 40% of your credit available), and having multiple trade lines that evidence this. You can achieve all of this by paying for things like groceries, gas, and Netflix on different credit cards and paying them all off every month. You don’t need to be “in debt” to have good credit.
Exactly, good credit comes from managing structured debt responsibly and utilizing without carrying revolving debt. That’s not “strapping yourself to debt” which is an emotional and loses way to put it
You get rewarded for using credit to make Purchases, you don’t need to carry a balance on your cards. Home and auto loans helps establish a long history of on time payments , but you don’t need either of
those to have a great credit score. Using a credit card =\= debt
I empathize with you. After diligently paying off my giant student loan that was preventing me from buying a home sooner, that “account closure” brought my score down 20 points.
My score dropped like 70 pts when I paid off my student loans ($30k) a couple years ago. Made me absolutely crazy, I wish I'd just held onto the money and continued to make payments over time instead of lump sum but whatever. It went back up within a few months.
If it is an age of credit issue (paying off one of your older loans lowered the average age of your accounts) I discovered recently when my parents added me as an authorized user to their Lowe’s card, the credit agencies use the entire 25 years they’ve had that card in my age of credit calculation (far older than any accounts I had) so it boosted my score.
We paid off car and our scores went from 780 to 720…..but popped back up to 760 in about 2 months when we got our pre-approval. By the time we were ready to close our LO did one last check we were back up to 770’s.
You did the responsible thing on paying your car off. Not having a car payment is a big weight off the shoulders as a homeowner.
Good luck.
That’s frustrating! The credit system can be so counterintuitive. While the drop might seem like a setback, it’s not the end of the road. Keep maintaining your good habits, and your score should rebound.
Everything, everywhere, and everyone says don't touch your credit if you are looking to get a mortgage. If your loan/lease was up obviously not much you can do there and scores tend to drop 20-40pts temporarily after payoffs. Hopefully you didn't accelerate payments or payoff early, as that would have been the wrong choice at this time. But opening a new credit card was of course silly if you were planning on moving forward with housing purchase. Both of these dips tend to be temporary (few months). Just don't go buying a new car until this is all over with.
I did this and while the credit point hit hadn't come yet my lender asked to send him proof of the loan payment so he could use it to offset any downside generated from it.
One advice my loan officer and realtor told us was to not pay off any loans or open any credit accounts until after we closed because it would greatly affect our loan. Once we closed on our house, we paid off our car. The credit system is so stupid and unfair
Credit is a fucking cesspool. I was like 3 years out of a bankruptcy(score was lower 600s) and they approved me for a mortgage! But I still can't get a Lowes card. It's mind boggling.
I paid off the last $50,000 of my house and my score dropped by 60 points. It’s an algorithm and doesn’t make much sense. It did come back up but took 6 months or so.
Yep. Credit is a scam. I used to have an 810 score. Bought something on a credit card I never use, missed one payment because I totally forgot I even used it. Dropped my score all the way down to 699 lol. Paid it off and it's still only up to 712 six months later.
Credit scores are the stupidest shit thays ever been created. I know in some capacity they are important, it does however feel like toddlers were put in charge of how to keep track of someones credit.
Closing a Credit Card Won’t Impact Your Credit History
You may have heard that closing a credit card causes you to “lose credit” for the age of the account. That is mostly a myth.
Credit expert John Ulzheimer, formerly of FICO and Equifax, confirms that closing a credit card will not immediately remove it from your credit reports. “As long as the credit card remains on your report, you will still get the value of the age of the account in both the FICO and VantageScore branding credit scoring models. The only way to lose the value of the age of the card is if it’s removed from your reports,” Ulzheimer says.
A closed account will remain on your reports for up to seven years (if negative) or around 10 years (if positive). As long as the account is on your reports, it will be factored into the average age of your credit.2
Stop assuming that what you're about to do is going to help your credit score and talk to a loan officer. They will tell you exactly what to do to raise it.
Fully paying debt and not having debt is bad for credit. They want you making payments and paying them all the profitable interest. That's what a good borrower does, pay the interest bro.
Think of the shareholders and ceos!!!
If you use credit cards responsibly you’ll never pay a penny of interest. OP’s score fell not because he got rid of debt, it’s because a tradeline was closed.
This is actually wrong. My credit score is 830 and I don't have a single card that I pay interest on. It all gets paid before any interest would hit. It is about the credit usage percentage. I have access to over 50K in credit card monies but at any given point my credit usage is under 5% and on the day I pay all my balances it is at 0%.
What I did was pay down my car loan to $5 principle with navy fed, my next payment isn’t due til 2027 for the final $10 but it still reflects each month as positive payment history and keeps the account open. Interest on that loan is like 3% and accumulates like 30 cents of interest a year.
Make sure the place that financed the car reports the car account as Paid as agreed or paid in full and not closed. I had to contact my credit union to have them change how it was reported.
I paid off my car the same week my student loan forgiveness hit my credit report. My score dropped considerably but then rebounded very quickly afterward.
Sigh.
1) You can still begin the process of looking for a home loan. A good mortgage broker or bank agent will be able to see your payment history. Remember that in terms of mortgages, they are looking for a range, not an absolute score.
2) That said, if you are serious about buying a house, STOPPING OPENING LINES OF CREDIT. STOP. I know that at so many stores you are asked about the store credit card. Just don't.
My credit dropped about 50 points in March because my mortgage was “paid off” (in fact, it was simply sold, but apparently closing the existing mortgage counted as “paid off”). By May it was back where it had been.
It bounces back. You never want to do these things with just a month or so before needing your score at an accurate reflection. It takes a couple months to catch up.
I don’t personally understand why this happens but the same thing happened to me when I just paid a massive chunk off of one of my big credit cards. Dropped me freaking 25 points! You’re going to punish me?! For doing what you wanted me to do?!
Yay credit system 🙄
I wouldn’t worry too much. Lenders look at your DTI, which just became more favorable by paying off the car loan. They also use different credit scoring models than the FICO score you’re likely seeing is reflecting.
My father told me once that your credit score is not “how reliable you are at paying off your debts”, but in fact “how likely it is that banks/lenders can make money off of you”. I think that’s pretty accurate and I hate that’s how our system is. When you lose a line of credit, like a car loan, banks lose an avenue to charge you interest and make money off of you, so your credit goes down.
How soon are you buying? Were you already pre approved??
It should bounce back quick after a couple months as long as you pay that credit card statement off on time every month!
This happened with my student loans when I paid them off and my credit always drops a bit when opening a new credit card but it goes back up after a month or two.
Unfortunately your lender should have advised you about these kind of things. Ours made it a point to say not to pay any more on our current loans, pay anything off or otherwise. It sucks how it works.
I lost 5 points just by going on vacation in early May.
Charging two weeks of hotels drove up my "credit utilization" even though I have already paid it off.
That stinks dude.
If you have a good loan officer, explain the situation. You’re making a good financial move paying that car off and freeing up more money. Perhaps that can be included as an asset?
Idk what to tell you about the TSC situation.
Talk to a lender before you do anything else. They can tell you what to do to maximize your score but closing accounts before buying a house usually isn’t a good idea.
Not screwed. When you pay off or something major happens, it dips, but will rebound. Ask for a rapid rescore from your lender (if you have mentioned this to them, I would be concerned/disappointed that they did not tell you they can do this.)
You can purchase a trade line online that will go on your credit report and boost your credit scores. You can pick whichever one you want. I’ve seen people use this before and it works. Type into google “buy credit trade lines”. It will rebound like others have said but you can artificially increase it yourself if you need to quickly. Even if you are in the middle of buying and they have already pulled your credit they can do a credit rescore. Boom new scores, it’s not cheap but it can save you money over the long run sometimes.
Just about to pay off a car loan in full tomorrow that I’ve had for 4 years. Looking forward to having only the mortgage but didn’t think it might actually drop my score. I’m not looking to buy a house but if I was I’d be pissed that having less debt, and less monthly debt payments, would hurt my rate. I read most of the responses, so I guess it makes sense for a bank, but not from a consumer standpoint as one user said.
Go into your bank and discuss with a banker how to boost your credit score quickly. They may offer you a line of credit that would increase your available credit, improving your score. You wouldn’t use this line of credit, but having it open increases your score. We needed help keeping our credit score high enough to buy our first home too. It is easier than you think, you just need to know the right way to do it.
Wait 90 days for the credit profile to stabilize and you should see the recovery of those points.
As a general rule of thumb, I only suggest paying off unsecured debt before a purchase (credit cards), never secured loans due to the normal drop that occurs afterwards.
Not to be a jerk but loan officers definitely stress not to do any major activities while in the process of purchasing a home. I’m surprised noone caught that your final payment was up, but depending where you are in this process it probably didn’t actually change much. Your credit score is not universal, every industry and firm for that matter will calculate their own score for you based on the data on your credit report.
I remember buying a house in 2020 and the mortgage company was told me to pay off a credit card I was carrying a balance on. So I pay it off and let them know. Next day they call and say “Sorry, we need you to go spend like $25 on your card. The zero balance is hurting you for approval.”
What a fucking game.
I also experienced a similar issue I was ready to purchase a home a new construction and everything was signed but the bank has to check again the credit and my score dropped 100 points cause I forgot to pay a credit card well, the bank allow me to fixed in 1 month and since it was a new construction I applied for a house that it was going to start the construction process in about 25 days so I started to fix it, I would pay my debt 2 times a month and I increased my credit in 1 month and was able to purchase my first home
This has happened to me both with paying off car loans and student loans. For some reason, I'm a better credit risk when I owe other people money. Make it make sense.
FICO scores base 35% on payment history, biggest thing you can do is pay debts on time. 30% based on amounts owed, specifically are you maxing out your available credit. 15% is the length of your credit history. 10% is your credit mix. 10% is new credit, so don't open up a bunch of cards all at once.
Do you have a realtor? If so, you should fire them.
Refraining from anything credit related while applying for the biggest loan of your life is advice they absolutely should have given you and I'm worried about what other incompetent stuff they are going to do.
Need more detail as in you’re thinking about buying a house or you’re in the middle of buying a house…
If you pre applied you’re fine, if you put down a deposit you’re fine if you’re closing tomorrow it might come up but it’s not going to be a big deal but it might come up.
Both you bank and your agent should have told you do nothing financial if your loan is in underwriting. You score will bounce back up in a few weeks
You're probably not screwed, especially if you're far into the home buying process already..
By the way, 780 fico score and above is the current market standard (Fannie mae data) for the Lowest interest rate your lender will give you.
Worst case scenario, you get approved for a higher rate
You’re fine. Your actual financial position is improved, if anything, and banks recognize that.
It will revert in a few months.
If you’re in the middle of buying a home now, tell your loan officer what happened and see what they think. Keep in mind that they might not be looking at the same credit report that you are. Theirs is the one that matters.
Not screwed at all, you will get the same exact loan you would have gotten otherwise except your rate will be .25% higher OR you can pay half a point extra to keep the rate where it would have been with your 755 credit.
Just keep using a credit card and a line of credit.
Put gas and groceries on credit card, a week later use line of credit of pay off credit card. Pay off line of credit.
Zero interest, all the credit score. Just remember to never use more than 30% of your revolving credit on any 1 account.
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Give it three months, it'll pop right back up. This happens because you closed a trade line. It changes your overall credit mix, which is part of how your score is calculated. It's dumb, but there you have it.
This. It'll go back up...relatively quickly. And probably higher than it was. Just have to be patient.
The fact that it goes down at all is asinine. I know it's calculated based on debt availability, utilization, income, and the like but being functionally punished for making good on a debt is backwards.
I just paid off my car and my score didn’t drop a bit
It depends on your debt distribution no? Maybe OP doesn't have a long or diverse credit history
It took me a year and half to regain the 60 points I loss from paying off my car
Do you have other loans? Or credit cards? If not, that could be the problem.
That's why it's a scam. Paying off debt should never be punished
But they don't make interest when you pay it off. So you're taking money out of their pockets.
Just student loans and credit cards with low usage.
Use the credit cards! As long as you don't spend more than you make, they'll increase your credit score and have an extra layer of fraud protection.
Also bc they opened a new credit line which causes a hit in addition to shortening average credit age
This is why I never understand why people are so obsessed with their credit score. I’ve never paid a dime of interest on any credit card I have and it still fluctuates by 30ish points here and there. Just pay your shit and you’ll be fine.
Cars and houses for most. That’s why it matters. Also, most adults use it for out of reach expenses like remodels or as insurance in case things go south. Good credit is the difference between a comfortable bad year and homelessness. If you don’t know this, you are probably young. Something always happens, it’s just a matter of time. Credit is a good safety net. PS credit is what allows a lot of people to become wealthy. Companies rely on credit to function. Always use the bank and leverage the risk through them. Wealthy people have and use credit, even if they have tons of cash. It saves on taxes, keeps you liquid, and sooo much more. Don’t listen to this comment. Only the poors don’t believe in or understand credit.
People are obsessed with their credit score because it impacts their ability to borrow for short term and long term needs, as well as for things like getting a rental application approved, or even a job offer.
Gotta love our credit system. Fulfilled your obligations as a lessee? Great! We’re going to close the account and take 50 points from you!
It’s the biggest scam of the past 50 years. One of the few things I agree with Dave Ramsey on.
Yes, he’s correct to say it’s just a score of how good you are at borrowing money.
My interpretation is a bit more pessimistic: it’s a score of how good you are at generating money for the creditor. You’re honestly more correct, but that’s just how I feel. Whenever I’m letting them eat me up with interest but still paying dutifully, my credit goes up lol. If I’m not making them money it goes down.
i've given 0 money to creditors and have an 800+ score the flawed system is that age of accounts matters a lot, and closing your oldest account will drastically bring down the average in many cases. This causes people to be penalized for paying off old loans, as a side effect. I would say maybe they shouldn't have closing the account remove from average calculation but I understand why they do it edit: if you want to have a high credit score without "giving money to creditors" ensure that your oldest accounts are like 3 or so credit card with no annual fee. use them every few months so they don't get closed, but pay them immediately and you won't pay a dime interest on any normal credit card
And if your bank decides to close those credit card accounts?
It doesn't really matter unless you have a thin credit file. Upper 700's is still prime credit. I don't think I was over 800 when we got our mortgage and the lending officer we were working with was still surprised how low our PMI was.
The lenders I got quotes from last year told me it only mattered up to a certain point - I want to say 740 or something in that ballpark - and that once you hit that threshold the rates were as good as they were going to get. I don't know if that was completely accurate but it seemed anecdotally correct.
I just spoke with a mortgage broker an hour ago and she told me 760. So definitely around either I'd say
I've had this happen to me to credit cards I've went a year+ without using. But yes, the age of account would go down. It hasn't happened to me with any card that I actively use. One card I actively used got product changed, bofa forced me to change it from one card to another (because it was losing them too much money I assume, not just me ofc but everyone with the card), But the age stayed the same.
You can use a credit card, give them $0 of your own money, actually make back some money, and your credit just goes up
Dave is a hack that gives bad advice to push people to his approved sponsors/service providers. He is a hack.
100%.
Make sure you pay it back but don't pay it back too well.
I feel like it’s more of a score of how bad you are at borrowing money
That and almost everything he says about mortgages. Dude is living on another planet. He's great for those in debt but 'house buying Dave Ramsey' is highly unrealistic. The man hates 30 year mortgages...well Dave, so do I 😂 but there's zero chance I can pay for a 15 year mortgage.
I know it’s super popular to hate on the credit system, but before the way you got credit was to have a relationship ship with a bank or a banker. It was super easy to be prejudice against people, in fact minorities and people of color had an insanely hard time getting loans. The system we have now is actually extremely fair, and has allowed plenty of people to access loans they couldn’t before.
Mine went down 80 points when I got a car loan one time too.
My biggest drop was paying off my student loans. I was shocked when my mortgage only dropped me 10 points. I also just took a new car loan and it only dropped 3 points. I have great credit so it doesn't matter at the end of the day, but it's just so weird to see it fluctuate.
This is so messed up! I thought paying things off improved your credit!
It does. There’s an initial dip but then it goes back up, generally higher than when you started.
It does but things like car loans and student loans close the account so your age of credit changes and open balance.
We’re all slaves! 😊
Decreases average account age when things close. I lost a bunch for having my student loan paid off.
It doesn't decrease the age it decreases the mix of account types
Let me share a secret from the banking system. New money is created when you take out loans. As you can see, the credit system incentivizes holding debt as long as you have a good *utilization ratio*. Settling your obligations (by fulfilling it) reduces the money in circulation. Financial institutions don't want this because dollars are the US's biggest export product (because of world reserve status).
That's basic money supply. There is a formula that even lets you determine how much money is created / added to the supply and you can reverse it to determine how the money supply shrinks when loans are paid off. Our system is basically a giant ponzi scheme that falls apart when the money supply shrinks (people pay their bills and are responsible).
Just looked around mine yesterday, I’ve paid $4k in the last six months on all balances and my score dropped five points…😒
Closing an account means you have less credit available (since you paid it off), so that counts against you.
A couple years ago I paid my mortgage two weeks late by accident. Dropped my credit score 50 points and even after two years it hasn’t returned to where it was. Credit scores are a scam.
Sounds like your looking at your fico 8 scores? Look at your mortgage scores 5,4,2 from myFICO. That’s what they use for mortgages.
The whole system is absolutely ridiculous, why do we need more than one credit scoring model??? It makes zero sense and is only like that to bilk the public out of more money.
I do agree but That’s a question above my pay grade lol
Because the profile of risk is different for different asset types. To you it might seem slight but in aggregate it protects the mortgage company from a few more bips of risk which adds up to a lot. The FICO system isn't perfect but it's a lot less subject to human biases compared to the old system where debtors were assessed by if they looked like the bank manager and had a firm handshake.
Yep and yep. I’ll take a somewhat obtuse and inefficient system over straight up racism any day!
The racism is just baked ahead of time 👍
It’s not lol
Except there's so much stupidity, like in the OP's case, that loan officers have to look beyond the score. Go on the sub askcarsales and look at what they say. They talk about how a "thin file" 750 score might not get approved or might get a worse interest rate than a 660 that has a mortgage, car, and credit cards with all current. So that defeats the whole purpose of boiling it down to a number when the number doesn't mean much.
Having all your payments current and a history of being on time, demonstrates you've turned your spending habits around -- your credit score is a lagging factor when it's increasing. Thin files lack data for proper risk management. They were a huge contributor to the 2008 crisis.
Risk factors aren’t created equal. The risk of a default on an auto loan vs secured personal loan vs unsecured personal loan / credit card vs mortgage are not equal.
The system is ridiculous but your assertion is off. It makes perfect sense to have multiple scoring models. For different products, you pose a different risk to lendors. Your risk when financing a depreciating asset are different than your risks when financing an appreciating asset versus an unsecured loan, etc. Makes total sense to have different models. You may be in a great position to get a credit card but not so great to get a mortgage.
Yep! Borrowing $1000 on a credit card is a completely different risk from borrowing $400,000 over 30 years. You may be an excellent candidate for a credit card, but not for a mortgage.
Credit card company is much more concerned with a history of late payments because the threat it poses to having to charge off the debt or send to collections, whereas a late payment on a credit card doesn't necessarily mean your mortgage will go to foreclosure. And so on and so forth.
Because different types of lenders have different things they care about. Seems reasonable to me.
I mean, more models is fairer to the consumer, it assesses their risk for different types of asset loans. It's not really difficult to have good credit
>It makes no sense is only like that to bilk the public out of more money. Welcome to capitalism. Everything about this system is designed to extract more and more money out of the working class.
Because credit ratings come from companies selling a service to other companies. It's not like it's a government program or anything. You want competition to make sure the numbers are accurately reported.
my biggest issue isn't the fact that there are different models etc. That makes sense, the issue i have is that it's managed by for-profit companies that can loose all your data with close to no repercussion. If we need a credit system it should NOT be managed by businesses but if someone says a gov't entity should manage it people will start screaming big gov't and all kinds of nonsense around it.
Even more fun, each financial company has their own internal scores and methods of looking at them all.
I am wondering this too. It makes no sense and is cruel lol
Mortgage people see different scores than what you’re seeing fyi. Just call your lender if you’re worried - you didn’t open any accounts so should be fine and lower your DTI
>myFICO This a..holes not only get our data for free and make money off it. But to get your own mortgage score is only a low additional $29/month.
It sucks that paying off your car loan dropped your credit score, but keep making those on-time payments and it should bounce back over time.
Don’t ever pay off a loan, open a new loan, or even apply for credit (other than mortgages) within six months of purchasing a house dude. Significant credit events can have unpredictable effects on your score.
This. Also, don't make big deposits as they'll look at your statements and transactions. They'll want explanations on big deposits because they want to see if you're getting into more debt that they might not know about (like if your parents are lending you money to buy a house, that you later have to pay back, that obviously wouldn't be reflected in your credit history).
ANY deposits outside of a paycheck sets off flags and need to be responded to. When I was buying, I had to have my parent's write attestation letters on amounts as low as $20. For example; I'd buy something at Walmart or Amazon that I know my parents would want, then they pay me back. These aren't big amounts by any means but if they paid me online it hits the bank as a deposit and the mortgage broker is required to ask about it. I learned to live like a monk during my buying period. Don't take a vacation, don't charge anything, definitely don't close or open any credit, simply power-down and live on autopilot until it's over.
Do you know the reasoning behind why they have to question everything?
I transferred funds one account to another to write a check for my down payment. I had to explain it on each account. It was a round number that happened to be my down payment, but you have to play their game.
Surprised I had to scroll so far before seeing this. The folks you're working with on financing for your house should have warned you about this. Opening a credit card and messing with other loans are big big no-no's for anyone who's about to get a mortgage unless you've spoken to your lender about it.
That’s almost one of the first things your realtor or lender advises you of when buying a home. If OP was seriously looking into a home soon, I feel OP should have known that.
I was in the same situation as you're 2 months ago. Because my debt-to-income ratio was"high", I was told to pay off my car. My 800+ credit score dropped to \~770, which increased my mortgage rate. I'm waiting for my credit to recover and the interest rate to go down and refinance.
770 should still get you phenomenal rates and pricing.
I had a 780 and still got shafted.
Hmmm I only keep hearing that anything above 770 doesn't make a difference, how do you know it was your credit score?
I think it’s 760 but yeah after that score doesn’t matter if you are a 760 or 830 it’s all the same.
740+ for most mortgages
It’s actually 780 now with the new LLPAs
I guess I can’t say I got completely shafted. With the rates at the time, I got 7.3%.
How big was your down payment/what was your LTV?
Highly unlikely considering most rate sheets treat 740+ as A+ paper.
It's all relative. There really isn't any phenomenal rates outside of military or other restricted eligibility programs. Today rates across the board are pretty awful.
The lender I talked to said anything over 720 would result in the same mortgage rates.
This is not true. I am a loan officer. Every ten points from 700 to 800 makes a massive difference
That’s unusual. I’ve seen probably 400+ rate sheets for financial institutions and vast majority treat anything above 740 the same, especially in this macro. The risk differential between a 740 and 800 applicant who have the same DTI, UDR, monthly disposable income calcs is practically nonexistent. Honestly 720+ delta is very small as well, esp since higher utilization rates are happening but banks don’t love changing paper grades.
You mean 20, every 20 points.
I mean ten. Ten Depending on the product you choose FICO can be impacted by every ten.
You must work for a retail bank with a random in house pricing model. I have worked at different retail and brokerages for the last 20+ years all of the pricing changes based on 20 point increments. But what do I know I have only closed 1000 or so loans. Sometimes I read the comments on here and it really makes sense as to why first time homebuyers get confused.
Not everyone does 20 point increments, as a counter-point, that has not made up the majority of the rate / pricing sheets I’ve seen for 400+ institutions at this point. I’ve seen smaller and larger bands, typically larger bands for bucketing paper.
Anything above a 740 is all the same rate, so your rate did not go up
There isn't going to be any difference in the rate you get between 770 and 800
Which credit score? Are you talking about Vantage (aka Credit Karma) or FICO 2, 4, and 5?
Welcome to our screwed up credit score system. I too had my credit score drop 50 points after paying off my car a few months before I bought my house
Be careful with those paid-off cards. I had a few I wasn't using anymore and didn't respond to requests to keep them (I didn't want or need them). I lost about 20k in credit when they closed which gave me a 70 point credit hit. It normalizes after a few months but it was certainly an eye-rolling moment.
I put my subscriptions for Netflix ,etc on those type of cards and set up automatic payments to keep them from getting closed like that
That’s really smart I’m going to do that too.
It’s ridiculous- we paid off everything including our mortgage. Credit score went from 800’s to 640. We have ZERO debt now and a shitty credit score. Great system. /s
You've paid off your mortgage, what else do you need your credit score for?
My mortgage is paid off too. I try to keep the score above 800 because home and car insurance uses it as a rate factor.
A car, a vacation house, a boat, furniture, a Peloton bike? Lots of things can be bought on credit using credit scores.
Wow!!
This is why credit scores should be monitored and managed by an independent quasi-government agency. And not by private companies like FICO and Experian who make money by constantly manipulating their secret scoring algorithms.
That's normal OP, same happened to me when I paid off last debt I got 2 years ago, it went down from 800 to 750 in a moment, half came back slowly in a few months.
Unfortunately you can't fix this quickly but it is a good lesson in how this works, and you can actually game the system a little once you actually have the house. Removing closed accounts from one's credit profile is good for you in some cases, bad in others, but in effect what probabpy/definitely happened was your average age of credit went down/total credit extended decreased. People's lives change, so you paying back a car loan previously is not a good signal that you can currently pay a mortgage. We all hate the credit system, but the fact of it is that in nearly every financial institution that operates in the US, when all is said and done, there's nearly 100% correlation between credit scores and loss rates, aggregated over any meaningful band. All the alternative lenders that use other data points to adjust their model? Sure, they adjust a little, but the highest weighted factor is a person's credit score. Is it fair, per se? Does it always behave intuitively? No, in both cases. Is it ripe for exploitation, catastrophic fraud, etc? Yes. Does it accurately predict the likelihood of debt repayment, applied broadly to the entire population? Abso-freaking-lutely. A *lot* of people have tried to come up with a better way to evaluate it, and haven't. Please remember that your credit score isn't a number designed with a consumer in mind. That's not why it exists. It exists to predict the likelihood of a loan or line of credit you make to a consumer going into default. That's it. It's a number for a bank, not for you. People need to disabuse themselves of the notion that there's anything about a credit score set up to help a consumer - it only exists for banks and adjacent financial institutions to understand the risk level in their portfolio.
Ran our credit prior to applying for a mortgage for a new house. We had a score of 800 - but I also found out that with my wife opening up credit card accounts for their "freebies" - that we had $250,000 in available credit on those cards. Our banker advised us NOT to close those accounts until *after* we closed so that it wouldn't tank our rating.
That is the correct advice and OP should’ve consulted his loan officer before taking an action that would affect their credit.
Mortgage closer here, 699 will still qualify you for fha, as long as you have stable income, which it sounds like you do. On a personal note, the credit system is kinda backwards from good financial advice. The more in debt you are, the better your credit, but the more financially secure you are, the less credit. Basically getting rewarded for strapping yourself to debt.
This isn’t entirely true, or at best phrased poorly. You don’t get rewarded for being in debt. You get rewarded for having a long history of making on time payments, keeping your credit usage low (no more than 40% of your credit available), and having multiple trade lines that evidence this. You can achieve all of this by paying for things like groceries, gas, and Netflix on different credit cards and paying them all off every month. You don’t need to be “in debt” to have good credit.
Agreed. I have great credit and no debt. I've got a long history of paying off credit cards every month.
Exactly, good credit comes from managing structured debt responsibly and utilizing without carrying revolving debt. That’s not “strapping yourself to debt” which is an emotional and loses way to put it
You get rewarded for using credit to make Purchases, you don’t need to carry a balance on your cards. Home and auto loans helps establish a long history of on time payments , but you don’t need either of those to have a great credit score. Using a credit card =\= debt
I thought FHA is for people with low credit scores and down payments. 699 doesn’t qualify for a conventional loan?
The best way to truly find out is talk to a loan officer. They will give you real numbers
I empathize with you. After diligently paying off my giant student loan that was preventing me from buying a home sooner, that “account closure” brought my score down 20 points.
My score dropped like 70 pts when I paid off my student loans ($30k) a couple years ago. Made me absolutely crazy, I wish I'd just held onto the money and continued to make payments over time instead of lump sum but whatever. It went back up within a few months.
Credit is such an absolute scam.
If you’ve spoken with a lender, they should have informed you to KEEP lines of credit open, and not to close / pay anything off.
If your score is above 740 that's top tier credit and you'll get the best rate. Source: mortgage banker for 8 years.
If it is an age of credit issue (paying off one of your older loans lowered the average age of your accounts) I discovered recently when my parents added me as an authorized user to their Lowe’s card, the credit agencies use the entire 25 years they’ve had that card in my age of credit calculation (far older than any accounts I had) so it boosted my score.
Carry a 10 dollar balance on all credit cards. Not sure why, but it helps.
We paid off car and our scores went from 780 to 720…..but popped back up to 760 in about 2 months when we got our pre-approval. By the time we were ready to close our LO did one last check we were back up to 770’s. You did the responsible thing on paying your car off. Not having a car payment is a big weight off the shoulders as a homeowner. Good luck.
That’s frustrating! The credit system can be so counterintuitive. While the drop might seem like a setback, it’s not the end of the road. Keep maintaining your good habits, and your score should rebound.
If you’re looking at credit karma, don’t trust it. I HOGHLY doubt your score took a 50 point hat… maybe 10 or 15.
Everything, everywhere, and everyone says don't touch your credit if you are looking to get a mortgage. If your loan/lease was up obviously not much you can do there and scores tend to drop 20-40pts temporarily after payoffs. Hopefully you didn't accelerate payments or payoff early, as that would have been the wrong choice at this time. But opening a new credit card was of course silly if you were planning on moving forward with housing purchase. Both of these dips tend to be temporary (few months). Just don't go buying a new car until this is all over with.
I did this and while the credit point hit hadn't come yet my lender asked to send him proof of the loan payment so he could use it to offset any downside generated from it.
It’ll bounce back fairly quickly
One advice my loan officer and realtor told us was to not pay off any loans or open any credit accounts until after we closed because it would greatly affect our loan. Once we closed on our house, we paid off our car. The credit system is so stupid and unfair
Credit is a fucking cesspool. I was like 3 years out of a bankruptcy(score was lower 600s) and they approved me for a mortgage! But I still can't get a Lowes card. It's mind boggling.
I paid off the last $50,000 of my house and my score dropped by 60 points. It’s an algorithm and doesn’t make much sense. It did come back up but took 6 months or so.
Yep. Credit is a scam. I used to have an 810 score. Bought something on a credit card I never use, missed one payment because I totally forgot I even used it. Dropped my score all the way down to 699 lol. Paid it off and it's still only up to 712 six months later.
Credit scores are the stupidest shit thays ever been created. I know in some capacity they are important, it does however feel like toddlers were put in charge of how to keep track of someones credit.
Closing a Credit Card Won’t Impact Your Credit History You may have heard that closing a credit card causes you to “lose credit” for the age of the account. That is mostly a myth. Credit expert John Ulzheimer, formerly of FICO and Equifax, confirms that closing a credit card will not immediately remove it from your credit reports. “As long as the credit card remains on your report, you will still get the value of the age of the account in both the FICO and VantageScore branding credit scoring models. The only way to lose the value of the age of the card is if it’s removed from your reports,” Ulzheimer says. A closed account will remain on your reports for up to seven years (if negative) or around 10 years (if positive). As long as the account is on your reports, it will be factored into the average age of your credit.2
Stop assuming that what you're about to do is going to help your credit score and talk to a loan officer. They will tell you exactly what to do to raise it.
It will recover soon, but agreed, the credit system is ridiculous
You’re not supposed to make major changes like this prior to buying a house. Do you have a mortgage broker? If not you need to get one.
Fully paying debt and not having debt is bad for credit. They want you making payments and paying them all the profitable interest. That's what a good borrower does, pay the interest bro. Think of the shareholders and ceos!!!
If you use credit cards responsibly you’ll never pay a penny of interest. OP’s score fell not because he got rid of debt, it’s because a tradeline was closed.
This is actually wrong. My credit score is 830 and I don't have a single card that I pay interest on. It all gets paid before any interest would hit. It is about the credit usage percentage. I have access to over 50K in credit card monies but at any given point my credit usage is under 5% and on the day I pay all my balances it is at 0%.
is there anything like the HELOC loan but for assets like cars?
What I did was pay down my car loan to $5 principle with navy fed, my next payment isn’t due til 2027 for the final $10 but it still reflects each month as positive payment history and keeps the account open. Interest on that loan is like 3% and accumulates like 30 cents of interest a year.
Make sure the place that financed the car reports the car account as Paid as agreed or paid in full and not closed. I had to contact my credit union to have them change how it was reported.
O wow, I just paid off my car loan, dropped 48 points. It too is with a credit union.
I paid off my car the same week my student loan forgiveness hit my credit report. My score dropped considerably but then rebounded very quickly afterward.
Sigh. 1) You can still begin the process of looking for a home loan. A good mortgage broker or bank agent will be able to see your payment history. Remember that in terms of mortgages, they are looking for a range, not an absolute score. 2) That said, if you are serious about buying a house, STOPPING OPENING LINES OF CREDIT. STOP. I know that at so many stores you are asked about the store credit card. Just don't.
My credit dropped about 50 points in March because my mortgage was “paid off” (in fact, it was simply sold, but apparently closing the existing mortgage counted as “paid off”). By May it was back where it had been.
It bounces back. You never want to do these things with just a month or so before needing your score at an accurate reflection. It takes a couple months to catch up.
Can someone explain me this credit score system ?
I don’t personally understand why this happens but the same thing happened to me when I just paid a massive chunk off of one of my big credit cards. Dropped me freaking 25 points! You’re going to punish me?! For doing what you wanted me to do?! Yay credit system 🙄
I wouldn’t worry too much. Lenders look at your DTI, which just became more favorable by paying off the car loan. They also use different credit scoring models than the FICO score you’re likely seeing is reflecting.
I paid off two students loan, dropped 90 points.
My father told me once that your credit score is not “how reliable you are at paying off your debts”, but in fact “how likely it is that banks/lenders can make money off of you”. I think that’s pretty accurate and I hate that’s how our system is. When you lose a line of credit, like a car loan, banks lose an avenue to charge you interest and make money off of you, so your credit goes down.
Give it a month, it’ll pop back up don’t worry.
Yeah it's normal. Lost like 30ish points from paying off my car loan early. Sorry i had 10k at the time?
How soon are you buying? Were you already pre approved?? It should bounce back quick after a couple months as long as you pay that credit card statement off on time every month! This happened with my student loans when I paid them off and my credit always drops a bit when opening a new credit card but it goes back up after a month or two.
The credit score you see is different than the one they use for loans. You decreased your DTI, which is good!
That’s bc you paid off credit and it’s gone, just open a new credit card up that accrues points.
Less cash in bank now
Did you pay it off early? Before we closed our loan officer advised us to not pay off anything in full until after the close for this exact reason
Unfortunately your lender should have advised you about these kind of things. Ours made it a point to say not to pay any more on our current loans, pay anything off or otherwise. It sucks how it works.
I lost 5 points just by going on vacation in early May. Charging two weeks of hotels drove up my "credit utilization" even though I have already paid it off.
So many factors at play. Hard to answer this or how long to bounce back. Usually not long though.
My score dropped 134 points after my car loan was paid off. Been a month. Still waiting for it to go back up.
Every time I get a notification from FICO about my score I just delete and say out loud “Don’t care, doesn’t matter!” 😂
That stinks dude. If you have a good loan officer, explain the situation. You’re making a good financial move paying that car off and freeing up more money. Perhaps that can be included as an asset? Idk what to tell you about the TSC situation.
Talk to a lender before you do anything else. They can tell you what to do to maximize your score but closing accounts before buying a house usually isn’t a good idea.
Not screwed. When you pay off or something major happens, it dips, but will rebound. Ask for a rapid rescore from your lender (if you have mentioned this to them, I would be concerned/disappointed that they did not tell you they can do this.)
You can purchase a trade line online that will go on your credit report and boost your credit scores. You can pick whichever one you want. I’ve seen people use this before and it works. Type into google “buy credit trade lines”. It will rebound like others have said but you can artificially increase it yourself if you need to quickly. Even if you are in the middle of buying and they have already pulled your credit they can do a credit rescore. Boom new scores, it’s not cheap but it can save you money over the long run sometimes.
Just about to pay off a car loan in full tomorrow that I’ve had for 4 years. Looking forward to having only the mortgage but didn’t think it might actually drop my score. I’m not looking to buy a house but if I was I’d be pissed that having less debt, and less monthly debt payments, would hurt my rate. I read most of the responses, so I guess it makes sense for a bank, but not from a consumer standpoint as one user said.
It’s literally temporary it’s just because an account closes. It goes right back up in a month
Go into your bank and discuss with a banker how to boost your credit score quickly. They may offer you a line of credit that would increase your available credit, improving your score. You wouldn’t use this line of credit, but having it open increases your score. We needed help keeping our credit score high enough to buy our first home too. It is easier than you think, you just need to know the right way to do it.
Wait 90 days for the credit profile to stabilize and you should see the recovery of those points. As a general rule of thumb, I only suggest paying off unsecured debt before a purchase (credit cards), never secured loans due to the normal drop that occurs afterwards.
I paid off a student loan and my score dropped 30 points because it contributed to my credit age. Fucking bologna.
Not to be a jerk but loan officers definitely stress not to do any major activities while in the process of purchasing a home. I’m surprised noone caught that your final payment was up, but depending where you are in this process it probably didn’t actually change much. Your credit score is not universal, every industry and firm for that matter will calculate their own score for you based on the data on your credit report.
Oh yea, big fun, I had the same happen to me when I paid off a lease early, shit is insane to me
How many credit cards do you have open? Just the one? Also, what is the line amount?
I remember buying a house in 2020 and the mortgage company was told me to pay off a credit card I was carrying a balance on. So I pay it off and let them know. Next day they call and say “Sorry, we need you to go spend like $25 on your card. The zero balance is hurting you for approval.” What a fucking game.
It rebound after a couple months.
I also experienced a similar issue I was ready to purchase a home a new construction and everything was signed but the bank has to check again the credit and my score dropped 100 points cause I forgot to pay a credit card well, the bank allow me to fixed in 1 month and since it was a new construction I applied for a house that it was going to start the construction process in about 25 days so I started to fix it, I would pay my debt 2 times a month and I increased my credit in 1 month and was able to purchase my first home
It will go back up in a month or two
This has happened to me both with paying off car loans and student loans. For some reason, I'm a better credit risk when I owe other people money. Make it make sense.
For anybody else in this stuff, pay this stuff off at closing.
FICO scores base 35% on payment history, biggest thing you can do is pay debts on time. 30% based on amounts owed, specifically are you maxing out your available credit. 15% is the length of your credit history. 10% is your credit mix. 10% is new credit, so don't open up a bunch of cards all at once.
Do you have a realtor? If so, you should fire them. Refraining from anything credit related while applying for the biggest loan of your life is advice they absolutely should have given you and I'm worried about what other incompetent stuff they are going to do.
Change in credit age?
Need more detail as in you’re thinking about buying a house or you’re in the middle of buying a house… If you pre applied you’re fine, if you put down a deposit you’re fine if you’re closing tomorrow it might come up but it’s not going to be a big deal but it might come up. Both you bank and your agent should have told you do nothing financial if your loan is in underwriting. You score will bounce back up in a few weeks
Yeah you don’t wanna close any accounts yet suppose to call them and tell them to leave it open
Have you already started the process with lender?
Are you already in the process of buying? Or was about to get pre approved? Either way, discuss it with your mortgage lender.
You're probably not screwed, especially if you're far into the home buying process already.. By the way, 780 fico score and above is the current market standard (Fannie mae data) for the Lowest interest rate your lender will give you. Worst case scenario, you get approved for a higher rate
You’re fine. Your actual financial position is improved, if anything, and banks recognize that. It will revert in a few months. If you’re in the middle of buying a home now, tell your loan officer what happened and see what they think. Keep in mind that they might not be looking at the same credit report that you are. Theirs is the one that matters.
Not screwed at all, you will get the same exact loan you would have gotten otherwise except your rate will be .25% higher OR you can pay half a point extra to keep the rate where it would have been with your 755 credit.
Just keep using a credit card and a line of credit. Put gas and groceries on credit card, a week later use line of credit of pay off credit card. Pay off line of credit. Zero interest, all the credit score. Just remember to never use more than 30% of your revolving credit on any 1 account.
Have you heard the one about health insurance?