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Paid off student loan, credit score dropped 28 points
Posted on 10/19/14 at 9:12 am
Posted on 10/19/14 at 9:12 am
How does this happen? I don't understand credit scores at all. I have two student loans and paid one off in full last week. The next day I got a credit alert and when I went check, my debt had reduced by the amount I paid on the loan and my score dropped 28 points.
Did I do that wrong??? It was a 7.5% interest loan if that matters.
Did I do that wrong??? It was a 7.5% interest loan if that matters.
Posted on 10/19/14 at 9:21 am to DownshiftAndFloorIt
I am no expert and hopefully someone will offer a better explanation. I believe it has something to do with the amount of debt you owe. I believe the same thing can happen with credit cards. I know if you cancel a credit card it is possible for your credit score to go down.
Posted on 10/19/14 at 9:27 am to DownshiftAndFloorIt
Your score went down because your debt utilization went up. Open a credit card with a high limit and no annual fee. Your score should go back up.
Posted on 10/19/14 at 4:15 pm to DownshiftAndFloorIt
I think there has to be something else going on here. Simply paying off a student loan shouldn't cause a drastic drop in score. When was the last time you checked the score? What other credit do you
have? Btw, credit utilization has to do with credit card accounts, not installment loans. Total owed on all credit cards divided by total credit limits is your utilization. Best to be under 30%.
have? Btw, credit utilization has to do with credit card accounts, not installment loans. Total owed on all credit cards divided by total credit limits is your utilization. Best to be under 30%.
Posted on 10/19/14 at 5:44 pm to DownshiftAndFloorIt
It sounds like this may have been one of your older credit accounts. Unintended consequence of eliminating debt is that occasionally something like this happens.
Shouldn't be 28 points, though. Something else must be going on. I would go through your credit report with a fine tooth comb.
Shouldn't be 28 points, though. Something else must be going on. I would go through your credit report with a fine tooth comb.
Posted on 10/20/14 at 12:29 pm to DownshiftAndFloorIt
It is backwards, but essentially paying off installment accounts doesn't improve your score because that account is then closed. The credit rating companies rate you based on your ability to pay back debt. When an installment account is closed, they can no longer measure your risk based off of that account.
It differs with revolving accounts(credit cards) because paying off the balance does not close the account.
Credit Karma sucks and is usually off by 20-30 points. In addition it only gives you your transunion score. However, it gives you an opportunity to see if there are any negatives affecting your history.
It differs with revolving accounts(credit cards) because paying off the balance does not close the account.
Credit Karma sucks and is usually off by 20-30 points. In addition it only gives you your transunion score. However, it gives you an opportunity to see if there are any negatives affecting your history.
Posted on 10/21/14 at 2:16 pm to DownshiftAndFloorIt
quote:
Did I do that wrong??? It was a 7.5% interest loan if that matters
No, you did the right thing.
With no other details to help determine the cause, I'm going to guess that your lack of credit history/revolving credit is hurting you.
Posted on 10/21/14 at 5:40 pm to DownshiftAndFloorIt
I'm assuming both pre and post loan payment scores were from the same credit agency?
Which credit agency?
I pay monthly with Bank of America and they only give me quarterly credit scores(equifax/transunion/experian). My equifax score is about 25pts lower than my transunion score.
Which credit agency?
I pay monthly with Bank of America and they only give me quarterly credit scores(equifax/transunion/experian). My equifax score is about 25pts lower than my transunion score.
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