Can anyone make sense of credit scores?

3boysmom

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Why does a credit score go down when you pay off your debt? I paid off my car and a small remaining balance on a home equity loan in January. The only debt we have is the remaining balance of our home loan (less than 25% of the value of the home) and my credit card generally shows a balance because we run all expenses through it and pay it off each month. It's our airline miles card and I put an absurd amount of money on it. The credit report shows us using less than 1% of our credit limit. So why would both of our credit scores drop by about 15 points since we paid off the car and heloc? This makes no sense to me.
 
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lucas80

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Why does a credit score go down when you pay off your debt? I paid off my car and a small remaining balance on a home equity loan in January. The only debt we have is the remaining balance of our home loan (less than 25% of the value of the home) and my credit card generally shows a balance because we run all expenses through it and pay it off each month. It's our airline miles card and I put an absurd amount of money on it. The credit report shows us using less than 1% of our credit limit. So why would both of our credit scores drop by about 15 points since we paid off the car and heloc? This makes no sense to me.
Send me your DOB, SSN, credit card number with expiration date and security code, and bank account numbers with routing information and I will sort it out for you.
 

NCHawk5

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Send me your DOB, SSN, credit card number with expiration date and security code, and bank account numbers with routing information and I will sort it out for you.
This is what I meant about your original content. It just doesn’t work.
 

lucas80

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The same thing happened to us. Who knows. Maybe they like to see slightly more debt to justify loans. A credit score is really a judge of should they loan you money, not really a validation of your smart money practices. Right?
 
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Chishawk1425

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Nov 27, 2019
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Why does a credit score go down when you pay off your debt? I paid off my car and a small remaining balance on a home equity loan in January. The only debt we have is the remaining balance of our home loan (less than 25% of the value of the home) and my credit card generally shows a balance because we run all expenses through it and pay it off each month. It's our airline miles card and I put an absurd amount of money on it. The credit report shows us using less than 1% of our credit limit. So why would both of our credit scores drop by about 15 points since we paid off the car and heloc? This makes no sense to me.
High lines to balance ratio. If you are over 700 it mostly is irrelevant. FICO is very touchy.
 
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globalhawk

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Dec 16, 2003
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Why does a credit score go down when you pay off your debt? I paid off my car and a small remaining balance on a home equity loan in January. The only debt we have is the remaining balance of our home loan (less than 25% of the value of the home) and my credit card generally shows a balance because we run all expenses through it and pay it off each month. It's our airline miles card and I put an absurd amount of money on it. The credit report shows us using less than 1% of our credit limit. So why would both of our credit scores drop by about 15 points since we paid off the car and heloc? This makes no sense to me.
I bought a crap hole rental just to have healthy debt. We have a strange system.
 
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3boysmom

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High lines to balance ratio. If you are over 700 it mostly is irrelevant. FICO is very touchy.
Yeah, we hover right at 800. The only reason I am even remotely concerned is we want to purchase some property in Colorado. Still trying to work out exactly what we want, but I am leaning toward land and then developing it later. Not sure if being above 800 as opposed to right under it will make a difference.
 

Chishawk1425

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Yeah, we hover right at 800. The only reason I am even remotely concerned is we want to purchase some property in Colorado. Still trying to work out exactly what we want, but I am leaning toward land and then developing it later. Not sure if being above 800 as opposed to right under it will make a difference.
You are 100% GOOD TO GO! Those are phenomenal scores! Best of luck in your pursuits!
 

Old_wrestling_fan

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When our sons graduated college and had no debt and some savings left, one a lot, one very little, and were just starting with jobs that provided good income, etc, their credit scores were puny...because, essentially, they didn't have debt. Huh? As told to us at the time by people in the industry...they want to see that you pay debt off.

OK, alrighty, sure...but shouldn't there be some value assigned to NOT getting into debt first and having paid their way through school, etc? In retrospect, we should have gotten them a credit card in their HS years and had them run a few expenses through the card just to "get on the board". Nuts, if you ask me.
 

globalhawk

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Dec 16, 2003
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When our sons graduated college and had no debt and some savings left, one a lot, one very little, and were just starting with jobs that provided good income, etc, their credit scores were puny...because, essentially, they didn't have debt. Huh? As told to us at the time by people in the industry...they want to see that you pay debt off.

OK, alrighty, sure...but shouldn't there be some value assigned to NOT getting into debt first and having paid their way through school, etc? In retrospect, we should have gotten them a credit card in their HS years and had them run a few expenses through the card just to "get on the board". Nuts, if you ask me.
I never understood why a person gets punished for being financially responsible.
Edit: I never got a credit card in college because I knew I wouldn't be responsible with it. I got punished for it after school.
 
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Fan In Black

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Try posting pictures of hot guys.

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just a few photos of me and my friends that are not owned by dirty modeling agencies.
 
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3boysmom

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When our sons graduated college and had no debt and some savings left, one a lot, one very little, and were just starting with jobs that provided good income, etc, their credit scores were puny...because, essentially, they didn't have debt. Huh? As told to us at the time by people in the industry...they want to see that you pay debt off.

OK, alrighty, sure...but shouldn't there be some value assigned to NOT getting into debt first and having paid their way through school, etc? In retrospect, we should have gotten them a credit card in their HS years and had them run a few expenses through the card just to "get on the board". Nuts, if you ask me.
We had to co-sign for cars for the 2 oldest boys because they had never had credit cards or student loans. With the youngest we leased a car last year and put his name on it so that once the lease is up he will have a credit score. You teach them not to go into debt but then it comes back to bite them because they can't get a loan for the big stuff.
 
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The Tradition

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Apr 23, 2002
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Why does a credit score go down when you pay off your debt? I paid off my car and a small remaining balance on a home equity loan in January. The only debt we have is the remaining balance of our home loan (less than 25% of the value of the home) and my credit card generally shows a balance because we run all expenses through it and pay it off each month. It's our airline miles card and I put an absurd amount of money on it. The credit report shows us using less than 1% of our credit limit. So why would both of our credit scores drop by about 15 points since we paid off the car and heloc? This makes no sense to me.

Available credit is part of the equation. By paying off and closing accounts, the rating agencies think you're struggling.
 

Old_wrestling_fan

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I never understood why a person gets punished for being financially responsible.
Edit: I never got a credit card in college because I knew I wouldn't be responsible with it. I got punished for it after school.
Correct. This actually presented a snag/delay when it came time for my oldest son and his wife to buy their first home.

He/they were an EXCELLENT risk for a lender on a modest first mortgage in my mind, but since neither had much/any credit history...they had a little hiccup in the process.

What the?? Meanwhile, I know of some other folks that breezed through the home mortgage approval process that in my mind would be pretty sketch as to whether they could/would handle that debt.
 

globalhawk

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Correct. This actually presented a snag/delay when it came time for my oldest son and his wife to buy their first home.

He/they were an EXCELLENT risk for a lender on a modest first mortgage in my mind, but since neither had much/any credit history...they had a little hiccup in the process.

What the?? Meanwhile, I know of some other folks that breezed through the home mortgage approval process that in my mind would be pretty sketch as to whether they could/would handle that debt.
Funny story. I knew I had to run my credit card debt way past what I was comfortable with to improve my credit. This was a couple years after college. It worked. It got to the point that my credit limit was approaching my salary. WTF?
 

HawkinK.C.1

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You don't have to use credit at all to have a great score. If you simply have some credit accounts open and don't use them, they will report as an on time payment every month. Do this with a few cards and let a few years pass and you'll have an 800 even if you rarely use any of them.
As for the OP, your credit score didn't go down because you paid things off. There's obviously another factor of some sort in play. I'll bet if you check your score right after your credit card reports the balance as paid in full, your score will jump back up. It might simply be the time of month that you're checking as compared to when your credit card reports. Another thing that can make a person drop are new inquires, or new accounts that just opened which can decrease the average age of your open accounts. On time payments and credit used to credit available ratio are the two factors that carry the most weight.
 

Bank of Hawk

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The highest I’ve seen mine get to is 860. I suppose it’s the 17 years of no late or missed payments; variety of debt; paying off every loan I’ve ever taken expect for my current mortgage; been 1.5 years since my last inquiry which was a mortgage refi. Also pay for many many expenses on CC and pay it off so quick, haven’t paid a dime in cc interest for 10 years. But they still make money off me because the merchant fees.
 
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joelbc1

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you can’t always get what you want!
Why does a credit score go down when you pay off your debt? I paid off my car and a small remaining balance on a home equity loan in January. The only debt we have is the remaining balance of our home loan (less than 25% of the value of the home) and my credit card generally shows a balance because we run all expenses through it and pay it off each month. It's our airline miles card and I put an absurd amount of money on it. The credit report shows us using less than 1% of our credit limit. So why would both of our credit scores drop by about 15 points since we paid off the car and heloc? This makes no sense to me.
Mom...understanding credit scores is more confusing than understanding how a thermos works. Just keep paying those bills in a timely manner. Good luck!
 
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BrunoMars420

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Feb 14, 2016
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Yeah, we hover right at 800. The only reason I am even remotely concerned is we want to purchase some property in Colorado. Still trying to work out exactly what we want, but I am leaning toward land and then developing it later. Not sure if being above 800 as opposed to right under it will make a difference.
Yah if you are over 740 then you are good to go.
 

HawkinK.C.1

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The highest I’ve seen mine get to is 860. I suppose it’s the 17 years of no late or missed payments; variety of debt; paying off every loan I’ve ever taken expect for my current mortgage; been 1.5 years since my last inquiry which was a mortgage refi. Also pay for many many expenses on CC and pay it off so quick, haven’t paid a dime in cc interest for 10 years. But they still make money off me because the merchant fees.
This is really impressive considering a perfect score is 850 and the scale doesn't go any higher on commonly used scoring models.
 

Bank of Hawk

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This is really impressive considering a perfect score is 850 and the scale doesn't go any higher on commonly used scoring models.
Thanks!!

I double checked and I topped out at 842 a few months ago, according to Discover.
 

praguehawk

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Why does a credit score go down when you pay off your debt? I paid off my car and a small remaining balance on a home equity loan in January. The only debt we have is the remaining balance of our home loan (less than 25% of the value of the home) and my credit card generally shows a balance because we run all expenses through it and pay it off each month. It's our airline miles card and I put an absurd amount of money on it. The credit report shows us using less than 1% of our credit limit. So why would both of our credit scores drop by about 15 points since we paid off the car and heloc? This makes no sense to me.
Only reasonable explanation is the hubby took out a loan you don’t know about to pay for the standard hookers and blow and missed a few payments.
 

NCHawk5

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The highest I’ve seen mine get to is 860. I suppose it’s the 17 years of no late or missed payments; variety of debt; paying off every loan I’ve ever taken expect for my current mortgage; been 1.5 years since my last inquiry which was a mortgage refi. Also pay for many many expenses on CC and pay it off so quick, haven’t paid a dime in cc interest for 10 years. But they still make money off me because the merchant fees.
860? You sure about that?
 
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BubsFinn

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Why does a credit score go down when you pay off your debt? I paid off my car and a small remaining balance on a home equity loan in January. The only debt we have is the remaining balance of our home loan (less than 25% of the value of the home) and my credit card generally shows a balance because we run all expenses through it and pay it off each month. It's our airline miles card and I put an absurd amount of money on it. The credit report shows us using less than 1% of our credit limit. So why would both of our credit scores drop by about 15 points since we paid off the car and heloc? This makes no sense to me.
Your credit score is not a rating of how dependable you are with your money. It is a score based on how confident the lender is that they'll make money from you. That's why your score goes down if you pay off debt. If you pay it off, your lender is no longer collecting.
I had a loan for my HVAC system that I paid off early and my credit score immediately went down 17 points. The same thing happened when I paid off my car loan.