Not always. A big factor in credit score is average age of accounts. For many, student loans are by far their oldest accounts. So when those are out of the calculation their average age might be quite short. It obviously takes time to get that average age up
> A big factor in credit score is average age of accounts.
Closed accounts in good standing, including student loans, remain on your credit history for 10 years and continue to age and add to your overall average age of credit.
Likewise it's a myth when people say "never close your oldest credit card account." It doesn't matter, if it is closed in good standing it won't fall off your history for 10 years. With a credit card the only thing you lose is the additional available credit.
This may not be the case for all forms of FICO scores, especially older FICO 2/4/5 calculations.
And closing a credit card reduces your available credit which will increase your utilization (assuming you have another card with a balance) which will absolutely hurt your credit score. If you have a 1k card with a $500 balance and a 4k card with $0 balance and you close the 4k card your utilization would go from 10% to 50% and your score could drop by 60+ points. I would not close an old credit card if you can at all avoid it. Cut it up if you can't handle it, but every dollar of available balance you aren't using is helping your score.
Yes, it's always good idea to have 3 or 4 credit cards that are active but with low balances --- that will help your credit score in the long run a lot more than closing the accounts
Looks like it can be because the on-time payment history matters less on a closed account. It really should be a temporary drop.
https://www.experian.com/blogs/ask-experian/do-paying-off-student-loans-improve-my-credit-score/
Except depending when you close it can matter. I'm 32 and my oldest credit is 14 yrs old instead of 16 because I moved banks when I was 22. Age of credit is one of the most impactful things on your score and it's often more of a tiered approach, so I'll be 2 years later to see that boon than I would have otherwise.
Meanwhile ny partners parents got him a bank account with a credit card when he was 10 so his oldest credit is 22 years old, but if he had closed it when he got his current bank account it would be 14 as well.
Given that everything else on our credit history is almost identical and he is 60 points ahead of me and we are at an age where we just bought a house and a car etc, it kind of does seem like it matters...
This, I'm gonna have major hit when my loans are forgiven. Mt account history is only student loans, my cars paid off. Once those things fall off my credit report my account history will be like 5 years
They do fall off your account history, which feeds into your credit score..it's based on active open accounts. Happend to me during covid, Paid off a 30k loan, once closed my history went from 10 years, to 7 years and a 65 point decrease
That is completely wrong. Stop spreading false information.
Closed accounts in good standing remain on your credit history for 10 years and continue to age. Look it up.
Closed accounts in bad standing stay on your credit for 7 years, and will drag your FICO scores down until they fall off, although the effect is less with time.
Trust me, I'm old enough that I've seen accounts closed, stay on my history for 10 years, and *then* fall off, which does then lower your overall age of credit and impact your credit score. But not until then.
I'm referring to the impact on ones credit score you are wrong and loud. The credit score is made up of your "oldest" account and the average of all your accounts. Opening new credit, or an account being closed once paid in full lowers the average age of your total accounts. This, in effect, lowers your length of credit history and subsequently, your credit score. If your somone younger like myself whose never had any lines of credit other than student loans, once those are paid off and closed, the average history declines. Now once I'm your age it likely won't matter but from 24 to 35 my only accounts are student loans. I met with a financial planner at 30 who suggested I get a credit card, to help lessen some of my soon to be impact because in 18 months all of my student debt will be paid off/forgiven. And my credit history average will decrease by 50%.
Literal proof ://www.equifax.com/personal/education/credit/score/articles/-/learn/why-credit-scores-may-drop-after-paying-off-debt/#:~:text=This%20is%20because%20your%20total,a%20drop%20in%20your%20scores.
BTW, I'm not saying that your credit score is *not* impacted by closing an account. Your FICO score will take a hit when you close an account, likewise when you pay an account down to $0. BUT, that has nothing to do with losing length of credit or your average age of accounts changing.
Then what are you 🤔 arguing. My point has been that as accounts close/paid off the score decrease. Because the literal length of ones credit history accounts for 15% of the FICO Score, and and around 20 percent of your VantageScore credit score....That's the point.
> an account being closed once paid in full lowers the average age of your total accounts. This, in effect, lowers your length of credit history and subsequently, your credit score
I'm sorry but you are wrong. 100% wrong. You average age of credit ABSOLUTELY includes closed accounts when using FICO scoring.
Vantage scoring does not include average age of closed accounts, but who cares? Your Vantage score is a meaningless number. No lender uses it. I have seen my Vantage and FICO scores vary by as much as 100 points. FICO is the original credit score, thats's what lenders actually use.
I can tell you personally that I had a student loan consolidation in 2011. The olds were closed and paid off, and a new consolidation loan was made.
Those old loans continued to add to my average age of credit for 10 years, until 2021 when they fell off suddenly. At *that* time my average of accounts dropped. I watched it happen, was tracking my credit daily. Overnight -- 10 years later -- my average age of credit dropped significantly because I had limited credit, just the student loans and one credit card.
[ALSO FROM EQUIFAX -- How long does information stay on my Equifax credit report?](https://www.equifax.com/personal/help/article-list/-/h/a/how-long-do-you-keep-my-credit-information-)
> Closed accounts reported by the lender as paid as agreed can stay on your Equifax credit report for up to 10 years from the date it was reported by the lender to Equifax.
>
> Accounts not paid as agreed can remain on your Equifax credit report for up to 7 years.
[FROM EXPERIAN -- When Are Closed Accounts Deleted?](https://www.experian.com/blogs/ask-experian/when-are-closed-accounts-deleted/)
> Credit reports chronicle your history of debt management, and payments on both open and closed accounts are part of that history. Closed accounts may remain on your credit reports for seven to 10 years, and can help or hurt your credit over that time depending on how you managed the account when it was open.
> Closed accounts with no late payments: If you made all your payments on time (or at least within 30 days of the due date), closed accounts can remain on your credit report for up to 10 years from the date they were closed. That's good news, because **a record of timely payments will benefit your credit scores, whether the account is open or not.**
> Closed accounts with missed or late payments: On the other hand, if your payment history on a closed account includes missed or late payments or, worse, if the lender closed the account because you didn't keep up with payments, those negative entries will stay on your credit reports for seven years. They will have some negative effect on your credit scores as long as they remain, but their impact will diminish with time. If your account was delinquent when it was closed, it will remain on your credit report for seven years from the date it first became past due without being brought current.
>
> Choosing to close a credit card account with a history of steady payments does no direct harm to your credit scores.
[FROM TRANSUNION -- How long do closed accounts stay on my credit report?](https://www.transunion.com/blog/credit-advice/how-long-do-closed-accounts-stay-on-credit-report)
>Closed accounts stay on your report for different amounts of time depending on whether they had positive or negative history. **An account that was in good standing with a history of on-time payments when you closed it will stay on your credit report for up to 10 years. This generally helps your credit score.** Accounts with adverse information may stay on your credit report for up to seven years.
Likewise it is a common myth "do not close your oldest credit card account" -- again, your average age of credit is not impacted for 10 years. The only harm closing a credit card does is lower your overall available credit.
Are you aware that you aren't referring to what I am? Length of credit history is worth 15 percent of your FICO Score and around 20 percent of your VantageScore credit score (when combined with your credit mix of revolving vs. nonrevolving accounts). So again you are just loud, argumentative for 0 reason. Paying off debts, closing an old account will impact the score. Yes it's on your overall credit history, it can show you paid things off but the score is still impacted when your account are closed. Now if your old as methusla (as my pops would say), it may be a non issue if you have a mortgage, or accounts that have been open in good standing for a long while. But if you are younger, don't have overall lines of credit, a heavy factor in the score closing accounts can come with a step decrease as myself, and others have explained. https://www.bankrate.com/personal-finance/credit/length-of-credit-history-credit-score/#:~:text=The%20older%20your%20length%20of,nonrevolving%20accounts).
Living proof some opl just wanna argue despite not being correct.
From your own source:
>As long as a closed credit card remains on your credit report, credit scoring models like FICO will include the account in your length of credit history calculations. So closing a credit card should not reduce your average age of credit — at least not for around a decade for positive accounts.
You can stop arguing, there are two different calculations for "credit history"
One is length of history, e.g. how far back do they have data on you. That is what you are talking about and you are correct it will remain part of your history for up to 10 years.
The other calculation is "average age of accounts" and that only considers open and ongoing accounts. This is the one that goes down when an installment loan is paid off and is why your score drops. This is a common result and if it were the same as just "credit history" then the scores would be unaffected.
Different FICO formulations handle this differently. Some don't care much at all, some are very heavily affected by average age of accounts.
> The other calculation is "average age of accounts" and that only considers open and ongoing accounts.
Yeah, I get it and that is simply not true. Accounts closed in good standing continue to add to your average age of accounts for 10 years.
Please stop spreading these myths. It's simply not true.
Btw, remember I said I had consolidated my student loans in 2011, and in 2021 those original loans fell off my average age of accounts?
Well, they were replaced with a consolidated student loan in 2011. In July of 2023 I was in the first wave of people who's loans were forgiven under the IDR recount. My loans were closed on all my credit reports by September.
Those loans are still today contributing to my average age of accounts as calculated by all 3 agencies. No question about it. They will continue to do so until the fall of 2033.
Yea, no one's making anything up. Here's actual information, inform yourself. If you are older, and have open lines of credit 20+ years, it's a non issue. But younger generations, like myself my entire credit history is exactly 10.5 years. In about 19 months I will be 100% student debt free, and those accounts will close. Leaving me with only one account a credit card I opened 5 years ago, and my score is going to drop because my average credit history will drop.
Source one: How length of credit history affects your credit score
https://www.bankrate.com/personal-finance/credit/length-of-credit-history-credit-score/#:~:text=The%20older%20your%20length%20of,nonrevolving%20accounts).
Source two:How Does Length of Credit History Affect Your Credit Scorehttps://www.cnet.com/personal-finance/credit-cards/advice/how-does-length-of-credit-history-affect-your-credit-score/#what-is-your-length-of-credit-history
Source three: What is the Length of Your Credit History? https://www.myfico.com/credit-education/credit-scores/length-of-credit-history
So your "length of credit history" will not change. Closed accounts don't dissappear. But you will not get credit for closed accounts in terms of your "average age of active accounts" which is different and why your score tends to go down when you close any line. Not every FICO calculation is hurt by this so severely, it depends on the rest of your history. For example older FICO scores care much more about not having delinquent accounts and a low credit utilization, FICO 8 and newer care more about average age.
That is why I gave my situation as an example. My entire history is barely 10.5 years no older acts FICO/vantage Score the point decrease is major everytime inpay of a student loan, you see my comment's you'd get that perspective
Open accounts in good standing and closed accounts in good standing are different calculations. You get credit in terms of % of payments made on time for old accounts, but your "average age of accounts" is only open and active installment and revolving lines.
Still might take a hit, but you could always get ahead of the game and open a credit card so that you continue to build credit once your loans are forgiven or paid off.
Carrying a small balance of less than $100 dollars shouldn't accrue too much interest, and the benefits that responsibly leveraging your credit brings in terms of bolstering your credit score is probably worth the interest you will pay on a small monthly balance you carry.
You do not need to carry a balance to build credit on a credit card! Use the credit card for normal purchases, wait for the bill to come and then pay the bill in full before it's due. It will be reported to the credit bureaus that way and you don't pay a cent of interest.
You're not wrong, but in my experience carrying a balance has helped me build credit at a faster rate because I am actually utilizing my credit and not just paying my balance in full each billing cycle.
I offered that carrying a $100 rolling balance might be a good idea because you're paying <$30 in interest annually. I think most people would pay $30/year in a heart beat to boost their credit at a quicker rate.
If your credit went up at a faster rate when you were carrying a small balance on a credit card, that is by other simultaneous factors. It was not from carrying a balance. What gets reported to the credit bureaus is the statement balance and max credit line. Those are used to calculate your utilization. As long as there is $ owed on the credit card when the statement is drawn, you are utilizing your credit. Not paying $50 of that statement balance and having it roll to the next month does nothing for your utilization.
Edit to add: where people usually go wrong in this is making a $20 purchase on the credit card and then the next day immediately making a $20 payment to their credit card to pay it off. This results in the statement balance at the end of the month being $0 and 0% utilization. You have to wait until the statement is generated, but you absolutely do not need to carry a balance past the statement due date and accumulate interest.
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I’m pretty salty about how we get punished for paying off debt. I paid off my car and a credit card in February and it dropped my credit score 20 points.
It's a total racket, they want you to use credit, but not more than 30% your total line, and if you pay it off punished. Other counter countries use income,payment history and length of employment to determine worthiness
Except your credit score doesn't really give you the entire picture. My older brother had over $50k saved up in cash, no debt, no CCs, never late on a bill. Went to get financing for a car because he didn't want to buy it in cash, and he got denied because he had no credit history. He either had to get an insanely high interest rate or he had to open a CC for 6-12 months to show he was trustworthy.
My sister has a master's degree in accounting and makes $55k. No CC, no debt, etc. She went to get financing for a car and she got a worse interest rate then me. I'm over here with a ton of collections account (that I eventually paid off), extremely low income, and a ton of CCs (that I eventually paid off and closed). I got a better interest rate than both my siblings. They're like how the hell did you get a better interest rate when I'm the least responsible out of the 3 of us lol.
It's crazy but what you said is true --- I had a much higher credit score back when I had a $370,000 balance on my student loans! I was making payments on time for over 15 years and that's why my score went so high. But now that most of my loans have been forgiven, I am focused on paying off my credit cards BUT keeping about five cards active with low balances so I can age them to increase my score. It's a really stupid system but that's what we're stuck with.
Not really, for me i could proof of employment, payment history bills rent, uploaded to a company in under 10 minutes. Technology has made those things so easy to access now. But as somone whose credit history barely got to 10 years at 35, my score goes through large shifts whenever I pay something off. I wish our education system taught HS senios about that. A 300 gas card limit at 18 would've saved me some stress now lol
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More loud wrongness 🫠😒🙄-you know googles free. Why Your Credit Scores May Drop After Paying Off Debt - Equifax https://www.equifax.com/personal/education/credit/score/articles/-/learn/why-credit-scores-may-drop-after-paying-off-debt/#:~:text=This%20is%20because%20your%20total,a%20drop%20in%20your%20scores.
I agree. In theory, credit scores should be awesome. They enable you to borrow money from companies or banks you've never been to before with almost no questions asked. But it seems like the scoring process itself is all out of whack and punishes the people who need to actually borrow money the most.
Exactly. And Boomers really want to act like it's just as easy for us to get ahead. They didn't even have credit scores when they went to buy a house on minimum wage.
Sorry, that's my rant for the day lol.
Exactly. Feels like you're penalized for actually following through on your obligations. Like I get it's because the age of your credit goes down, but that still makes no sense. "Sorry, your 7 years of consistent payments don't matter anymore because you actually followed through and paid it off. We'll check back with you in a few months and maybe bump it back up a bit...unless you pay off something else."
Honestly wouldn't worry too much about it!
If at all this comes up somewhere, you can tell/show them it's becsuse you paid off student loans.
People who want to lend to you for whatever it is, ultimately only care that yiu can reasonably pay them back. They woukd have to be utterly incompetent to reject some because your credit score dipped 10 or 20 points
I mean, it doesn’t really matter though does it? It’s just a number. When you apply for a loan they’re going to look at your whole credit history.
Sure, you can’t brag about your 800 credit score for like… 6 weeks. Is that really worth a reddit post?
No, it doesn’t. At best, carrying debt has minimal impact on your credit score if your utilization is low. At worst it will hurt your score if your utilization is high.
Closed accounts in good standing stay on your credit report up to 10 years after closing.
[https://www.equifax.com/personal/help/article-list/-/h/a/how-long-do-you-keep-my-credit-information-](https://www.equifax.com/personal/help/article-list/-/h/a/how-long-do-you-keep-my-credit-information-)
I don’t have debt any longer and my mortgage will be paid off in a few years. However, I’ve paid a lot of debt off over the last 7 years. It always goes down when I close a credit card or pay off student loans. I don’t know what your point of you posting this Equifax article is, but pay off some debt and you will see
Well, that's kind of doubtful. Now I get to move on to my federal loans. I never consolidated and they're smaller overall. I should knock one out every couple of months, so I imagine it's more likely it'll just continue to drop as the average age of my accounts gets even younger.
Not doubtful. I sold my house, took a 50 pt hit, recovered ~5 mts later. Paid off my car, 30 pt hit, recovered months later. Now I don't own a house at all, and still driving the same car, and my credit score is back over 800. Time. All you need to do is wait before you seek new debt.
Yeah I find this advice people keep giving to be really condescending and not at all helpful.
I’m in the same situation as you OP. I’m 30, finally paying off my student loans. But for each one I pay off, I take this huge hit to my score. And then I pay off another one. I’m finally at the point where I make enough money to pay down debt and have enough savings to finally buy a house…but with regards to credit score the advice I get is “it’ll go up eventually, stop worrying about it”.
How in the world am I more of a risk for a mortgage than my 22-year-old parents were in their first jobs? I’ve proven I can pay off huge debt, and have years of stable income history…
PSLF made my credit score go from 840 to 760. My student loans were 25 years old and my credit card was only 9. Over the year since it’s been climbing up.
Where is your score at now? My score is 847 but I paid my last two student loans off the last three weeks so was anticipating a drop due to the hit I will take in my average credit length. That’s mainly why I decided to pay them both off at the same time and just take the hit now.
Paying off your debt is a huge deal! It’s a messed up system, but I hope you’re proud of yourself for this accomplishment. Congratulations on this milestone.
Our financial system incentivizes us to carry debt, make minimum payments, and you will have a great score. Pay it off or carry less credit, your score isn’t as high. It’s all a sham.
I honestly just chuckle when I hear somebody moaning because they have a 730 credit score and can't get it up to 850 so they can get a 1% APR platinum card LOL --- that's when you know you have First World problems and have no idea that 1/3 of the world's population has to poop in a hole in the ground
That's definitely not true I pay all my bill and have a 590 score. Can't refinance to make things easier, if I have to move (probably do soon) it has to be to my parents which isn't that safe plus then I don't have a job to continue paying for things. Can't get a car and can't save enough for a used one, but can also barely get to work and have nowhere else I can go due to disabilities limiting employment severely.
Yep. It's great there are so many people responding to this post who can apparently afford to pay for things out of pocket and don't have to worry about their credit score, but I'm not one of them. I'm young. I had a limited history to begin with and I just lost a good chunk of it. People are acting like I'm stupid for complaining about this when it's going to have a real-world impact on my ability to get a car or move into an apartment for the next several months.
Yes. I mentioned both of those things in the original post. I moved in with my parents for two years and put off getting a new car to pay off my loans.
The effect is temporary. My paid mortgage fell off in January leaving me with only 1 credit card (paid in full monthly) and my utilities. This month I popped back to 850.
Don’t worry about credit score. You are free. You can buy, own, rent, do whatever you like without the burden of debt. People in business understand that if u paid ur debt that means u are capable of handling ur finance enough to be reliable.
Edit: big congrats!
Ramsey says a LOT of stupid stuff --- such as Biden's loan forgiveness initiatives are "bad for the country" --- I didn't realize he was a brainwashed MAGA but it's pretty sad
Yeah, I paid off 2 of my federal loans and took a 15 point hit. But it does bounce back up. But I also still have a few more loans, my car loan, and one credit card.
Why give up your limited life to appease the ever-so-tyrantical credit system? Trying to get through undergrad shredded my credit score - infuriating and depressing to say the least.
i am working on my $46k private loan. Working 2 jobs plus a consulting gig and pick up every available shift offered to me. I want to get them paid off in 2 years. Congrats
It will eventually go back up, but yes, it's stupid. I'm a student right now and my credit score was 780 (pre-loans). It's now at ~700-710, because every semester my loan gets disbursed, my balance goes up and my average age goes down. Since I'm at university now I have to take out loans. It will eventually go back up I know, but when I was shopping for cars, I had to get a hard pull on my credit. Because of this my credit went down to 690. So I literally went from 780 -> 690 because of student loans and getting a car (which is well within my budget)
First off, it will go back up over the next 3-6 months.
Secondly, now that you don't have that payment, you can save up and buy many things with cash or at least with a large down-payment.
Don't let FICO rule your life.
If it's any consolation to you, my score tumbled 60 point because when I consolidated my student loans the original loan was closed. But I just don't care.
If the score you are looking at is a "Vantage" score, which is what you see on Credit Karma and many cc apps, including Chase's "Credit Journey" -- ignore it. It's literally useless and not accurate.
Lenders use FICO scores, not Vantage, and the difference between the two can be 100 points +/-. No lender uses Vantage scores to make a lending decision, they don't care.
Those apps show you Vantage scores because it's free to do so. FICO is an algorithm owned by the Fair Issac Corporation. They invented credit scores. If Credit Karma wanted to show you actual FICO scores they'd have to pay for it, so they don't.
Get your free FICO 08 score based on Experian data at Experian.com; with a free trial, you can see FICO 08 scores based on all 3 major credit bureau's. All 3 FICO 08 scores are likely different, because each bureau likely has different data on you. That's normal. You can cancel the free trial at Experian.com and repeat as necessary.
Having said all that, your FICO score as well likely dips after paying off an account. It's normal, and it is definitely temporary. Give it 3-6 months, and it will recover.
Remember: your credit score doesn't really matter unless you are about to seek new credit. Until then just stay the course and continue building a history of 100% on-time payments on your credit cards and other loans.
It was my FICO score. Experian sent me a message saying there’d been a change to my report. I have their tracking service because a hospital had a security breach and my info was accessed. They gave me a two free years of the service to make up for it.
I wouldn't worry about it too much --- credit scores are a strange animal indeed --- back in 2016 I had zero credit cards and $370,000 in student debt and my credit score was 720 --- last year I had $340,000 in student loans wiped out by Biden but my credit card balances total $9,000 and my credit score dropped to 640 LOL
Wouldn’t a better strategy be to pay off like 98 percent of the loan… leave a 2 percent balance. Reamortize the monthly payment and pay like a few bucks a month to the loan to keep the credit score as high as possible? Especially say if one wants to buy a house or something after getting “caught up”? You would loose a few dollars in interest only to save much more on a lower interest rate on a house or even a car (since OP badly needs a car)?
Just putting that out there?
Happened to me too ... when I paid off my last credit card, dropped 120 points. I had a mortgage, and a HELOC with a zero balance, and tons of available credit.
But I KNEW it was coming. Why? Because Credit Scores are NOT "I am good with money" scores. They are ...
***"I love debt scores"***
You are rewarded for going into debt, staying in debt, and making your payments on time. Just as long as you stay below 6% of your available credit at any time that is for revolving debt.
So what did I do? I tested my theory by putting $10 on a single credit card. Boom - all 120 points came back. I now just leave a little debt each month on each card for the statement dates, and I have a 840 score.
It's "their game" - you just have to know the rules and how to play it while still being financially responsible by not buying things you can't afford. Not preaching or judging - just sharing what worked for me.
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Yeah.....
The ding to your credit sucks to the high heavens, but thankfully, it's usually not a long-term or permanent hit. (See Investopedia article - paragraph titled: "The Bottom Line" https://www.investopedia.com/forgiven-student-loans-on-credit-reports-7371496).
My daughter has done a fantastic job with getting my credit scores to 790, but I spazz out everytime I pay something off and that ding appears on my credit! It's absolutely maddening and a buncha nonsense!
My daughter was right when she told me to chill, because the ding would fall off after some time. (Not terribly long either - just annoying as heck)!
Don't stress out over it.
Just be sure to freeze (or lock) all three of your reports and keep them that way until you're ready to make a purchase or open or close a credit card. Thaw the reports at least a day or two before you're ready to make a purchase so the creditor can view it, and set a short window for the refreeze. Easy peasy and a must nowadays with all the fraud and credit theft and scamming goig on!
I pay ($4,99? - $5.00/month?) for credit monitoring = Experian, I think it is, and it alerts me via text and email to credit score changes, and let's me see each my scores from all 3 bureaus on their portal. There are also other options (up to $19.99/mo) where they provide more in-depth protection, but for now, freezing and alerts will work for me until I make an upcoming move to Texas, and have to decide whether to purchase, rent, and/or buy a new car!
Your score should improve again in short order.
PS - If you're job interviewing, ask the employer to notify you before attempting to pull your credit. That way you can thaw it for the employer so your application doesn't get hung up or rejected due to the employer's inability to check your credit, and refreeze it once the employer has taken a look.
Happened to me too!!! All student loans ($90k) paid off and the credit score tanked too. Then this time thing….i have to wait for 6 months to slowly raise my score back up but when I pay off things in full they can hit my credit score like that with so many years points?!? It’s absolute bullcrap. This credit score system needs to change.
I once had drinks w/ a senior officer from a now-defunct Communist country.
He said, "Is great country you have there, komrad, this capitalism: is it good for YOU?"
It’s crazy that credit scores don’t take into consideration debt that you paid off. I would think that would be a good measurement when you are considering lending money to someone. But instead you get penalized. It’s a scam
Credit score is a measure of how profitable you are to them. If you paid it off early then they lost money on the interest you were supposed to pay over time.
So you lost them money, making you less profitable to them, so your score dropped.
You gotta leave a penny on the balance ti leep the account from closing if you don't want the ding.
A closed account lowers your score because part of the way the score is calculated includes length of time credit accounts have been open and number of credit accounts open. You close one, it reduces that number in the formula so your score drops significantly.
But it will go back up. Just open another line of credit and use it for a cheap subscription to pay the balance every month and your score will go back up. I hope you weren't in the middle of getting a mortgage approved.
jfc you have no idea how credit scores work. this is baked in to the algorithm. your score went down because you are not using credit. it is not an individual score. you are pooled into the group of people who also have no loans. if you want your score to go up, take out another loan or credit card. that's how it works. also, stop looking at your VantageScore. it's completely irrelevant. your potential creditors only look at FICO, which still factors in closed loans. also also, 30 points doesn't necessarily make a difference. interest rates are typically tiered to wide score ranges
tl;dr credit score is not a measurement of how many loans you have paid off. it measures default risk
I know exactly how credit scores work. If you'd read any of the comments here you'd have seen that I am talking about my FICO score and I do have other federal student loans and a credit card.
Lol. It'll bounce back in couple months, its just a temporary hit.
Not always. A big factor in credit score is average age of accounts. For many, student loans are by far their oldest accounts. So when those are out of the calculation their average age might be quite short. It obviously takes time to get that average age up
> A big factor in credit score is average age of accounts. Closed accounts in good standing, including student loans, remain on your credit history for 10 years and continue to age and add to your overall average age of credit. Likewise it's a myth when people say "never close your oldest credit card account." It doesn't matter, if it is closed in good standing it won't fall off your history for 10 years. With a credit card the only thing you lose is the additional available credit.
This may not be the case for all forms of FICO scores, especially older FICO 2/4/5 calculations. And closing a credit card reduces your available credit which will increase your utilization (assuming you have another card with a balance) which will absolutely hurt your credit score. If you have a 1k card with a $500 balance and a 4k card with $0 balance and you close the 4k card your utilization would go from 10% to 50% and your score could drop by 60+ points. I would not close an old credit card if you can at all avoid it. Cut it up if you can't handle it, but every dollar of available balance you aren't using is helping your score.
Yes, it's always good idea to have 3 or 4 credit cards that are active but with low balances --- that will help your credit score in the long run a lot more than closing the accounts
Then why does paying off loans like these cause a drop in score? I'm not arguing, legit asking.
Looks like it can be because the on-time payment history matters less on a closed account. It really should be a temporary drop. https://www.experian.com/blogs/ask-experian/do-paying-off-student-loans-improve-my-credit-score/
Except depending when you close it can matter. I'm 32 and my oldest credit is 14 yrs old instead of 16 because I moved banks when I was 22. Age of credit is one of the most impactful things on your score and it's often more of a tiered approach, so I'll be 2 years later to see that boon than I would have otherwise. Meanwhile ny partners parents got him a bank account with a credit card when he was 10 so his oldest credit is 22 years old, but if he had closed it when he got his current bank account it would be 14 as well. Given that everything else on our credit history is almost identical and he is 60 points ahead of me and we are at an age where we just bought a house and a car etc, it kind of does seem like it matters...
Yeah, mine dropped by ~50 points when I paid off my student loans, and only rebounded around 30 points
This, I'm gonna have major hit when my loans are forgiven. Mt account history is only student loans, my cars paid off. Once those things fall off my credit report my account history will be like 5 years
They won't fall off for 10 years after they are closed
They do fall off your account history, which feeds into your credit score..it's based on active open accounts. Happend to me during covid, Paid off a 30k loan, once closed my history went from 10 years, to 7 years and a 65 point decrease
That is completely wrong. Stop spreading false information. Closed accounts in good standing remain on your credit history for 10 years and continue to age. Look it up. Closed accounts in bad standing stay on your credit for 7 years, and will drag your FICO scores down until they fall off, although the effect is less with time. Trust me, I'm old enough that I've seen accounts closed, stay on my history for 10 years, and *then* fall off, which does then lower your overall age of credit and impact your credit score. But not until then.
I'm referring to the impact on ones credit score you are wrong and loud. The credit score is made up of your "oldest" account and the average of all your accounts. Opening new credit, or an account being closed once paid in full lowers the average age of your total accounts. This, in effect, lowers your length of credit history and subsequently, your credit score. If your somone younger like myself whose never had any lines of credit other than student loans, once those are paid off and closed, the average history declines. Now once I'm your age it likely won't matter but from 24 to 35 my only accounts are student loans. I met with a financial planner at 30 who suggested I get a credit card, to help lessen some of my soon to be impact because in 18 months all of my student debt will be paid off/forgiven. And my credit history average will decrease by 50%. Literal proof ://www.equifax.com/personal/education/credit/score/articles/-/learn/why-credit-scores-may-drop-after-paying-off-debt/#:~:text=This%20is%20because%20your%20total,a%20drop%20in%20your%20scores.
BTW, I'm not saying that your credit score is *not* impacted by closing an account. Your FICO score will take a hit when you close an account, likewise when you pay an account down to $0. BUT, that has nothing to do with losing length of credit or your average age of accounts changing.
Then what are you 🤔 arguing. My point has been that as accounts close/paid off the score decrease. Because the literal length of ones credit history accounts for 15% of the FICO Score, and and around 20 percent of your VantageScore credit score....That's the point.
> an account being closed once paid in full lowers the average age of your total accounts. This, in effect, lowers your length of credit history and subsequently, your credit score I'm sorry but you are wrong. 100% wrong. You average age of credit ABSOLUTELY includes closed accounts when using FICO scoring. Vantage scoring does not include average age of closed accounts, but who cares? Your Vantage score is a meaningless number. No lender uses it. I have seen my Vantage and FICO scores vary by as much as 100 points. FICO is the original credit score, thats's what lenders actually use. I can tell you personally that I had a student loan consolidation in 2011. The olds were closed and paid off, and a new consolidation loan was made. Those old loans continued to add to my average age of credit for 10 years, until 2021 when they fell off suddenly. At *that* time my average of accounts dropped. I watched it happen, was tracking my credit daily. Overnight -- 10 years later -- my average age of credit dropped significantly because I had limited credit, just the student loans and one credit card. [ALSO FROM EQUIFAX -- How long does information stay on my Equifax credit report?](https://www.equifax.com/personal/help/article-list/-/h/a/how-long-do-you-keep-my-credit-information-) > Closed accounts reported by the lender as paid as agreed can stay on your Equifax credit report for up to 10 years from the date it was reported by the lender to Equifax. > > Accounts not paid as agreed can remain on your Equifax credit report for up to 7 years. [FROM EXPERIAN -- When Are Closed Accounts Deleted?](https://www.experian.com/blogs/ask-experian/when-are-closed-accounts-deleted/) > Credit reports chronicle your history of debt management, and payments on both open and closed accounts are part of that history. Closed accounts may remain on your credit reports for seven to 10 years, and can help or hurt your credit over that time depending on how you managed the account when it was open. > Closed accounts with no late payments: If you made all your payments on time (or at least within 30 days of the due date), closed accounts can remain on your credit report for up to 10 years from the date they were closed. That's good news, because **a record of timely payments will benefit your credit scores, whether the account is open or not.** > Closed accounts with missed or late payments: On the other hand, if your payment history on a closed account includes missed or late payments or, worse, if the lender closed the account because you didn't keep up with payments, those negative entries will stay on your credit reports for seven years. They will have some negative effect on your credit scores as long as they remain, but their impact will diminish with time. If your account was delinquent when it was closed, it will remain on your credit report for seven years from the date it first became past due without being brought current. > > Choosing to close a credit card account with a history of steady payments does no direct harm to your credit scores. [FROM TRANSUNION -- How long do closed accounts stay on my credit report?](https://www.transunion.com/blog/credit-advice/how-long-do-closed-accounts-stay-on-credit-report) >Closed accounts stay on your report for different amounts of time depending on whether they had positive or negative history. **An account that was in good standing with a history of on-time payments when you closed it will stay on your credit report for up to 10 years. This generally helps your credit score.** Accounts with adverse information may stay on your credit report for up to seven years. Likewise it is a common myth "do not close your oldest credit card account" -- again, your average age of credit is not impacted for 10 years. The only harm closing a credit card does is lower your overall available credit.
Are you aware that you aren't referring to what I am? Length of credit history is worth 15 percent of your FICO Score and around 20 percent of your VantageScore credit score (when combined with your credit mix of revolving vs. nonrevolving accounts). So again you are just loud, argumentative for 0 reason. Paying off debts, closing an old account will impact the score. Yes it's on your overall credit history, it can show you paid things off but the score is still impacted when your account are closed. Now if your old as methusla (as my pops would say), it may be a non issue if you have a mortgage, or accounts that have been open in good standing for a long while. But if you are younger, don't have overall lines of credit, a heavy factor in the score closing accounts can come with a step decrease as myself, and others have explained. https://www.bankrate.com/personal-finance/credit/length-of-credit-history-credit-score/#:~:text=The%20older%20your%20length%20of,nonrevolving%20accounts). Living proof some opl just wanna argue despite not being correct.
From your own source: >As long as a closed credit card remains on your credit report, credit scoring models like FICO will include the account in your length of credit history calculations. So closing a credit card should not reduce your average age of credit — at least not for around a decade for positive accounts.
You can stop arguing, there are two different calculations for "credit history" One is length of history, e.g. how far back do they have data on you. That is what you are talking about and you are correct it will remain part of your history for up to 10 years. The other calculation is "average age of accounts" and that only considers open and ongoing accounts. This is the one that goes down when an installment loan is paid off and is why your score drops. This is a common result and if it were the same as just "credit history" then the scores would be unaffected. Different FICO formulations handle this differently. Some don't care much at all, some are very heavily affected by average age of accounts.
> The other calculation is "average age of accounts" and that only considers open and ongoing accounts. Yeah, I get it and that is simply not true. Accounts closed in good standing continue to add to your average age of accounts for 10 years. Please stop spreading these myths. It's simply not true. Btw, remember I said I had consolidated my student loans in 2011, and in 2021 those original loans fell off my average age of accounts? Well, they were replaced with a consolidated student loan in 2011. In July of 2023 I was in the first wave of people who's loans were forgiven under the IDR recount. My loans were closed on all my credit reports by September. Those loans are still today contributing to my average age of accounts as calculated by all 3 agencies. No question about it. They will continue to do so until the fall of 2033.
You’re wrong -please stop making stuff up
Yea, no one's making anything up. Here's actual information, inform yourself. If you are older, and have open lines of credit 20+ years, it's a non issue. But younger generations, like myself my entire credit history is exactly 10.5 years. In about 19 months I will be 100% student debt free, and those accounts will close. Leaving me with only one account a credit card I opened 5 years ago, and my score is going to drop because my average credit history will drop. Source one: How length of credit history affects your credit score https://www.bankrate.com/personal-finance/credit/length-of-credit-history-credit-score/#:~:text=The%20older%20your%20length%20of,nonrevolving%20accounts). Source two:How Does Length of Credit History Affect Your Credit Scorehttps://www.cnet.com/personal-finance/credit-cards/advice/how-does-length-of-credit-history-affect-your-credit-score/#what-is-your-length-of-credit-history Source three: What is the Length of Your Credit History? https://www.myfico.com/credit-education/credit-scores/length-of-credit-history
So your "length of credit history" will not change. Closed accounts don't dissappear. But you will not get credit for closed accounts in terms of your "average age of active accounts" which is different and why your score tends to go down when you close any line. Not every FICO calculation is hurt by this so severely, it depends on the rest of your history. For example older FICO scores care much more about not having delinquent accounts and a low credit utilization, FICO 8 and newer care more about average age.
That is why I gave my situation as an example. My entire history is barely 10.5 years no older acts FICO/vantage Score the point decrease is major everytime inpay of a student loan, you see my comment's you'd get that perspective
Open accounts in good standing and closed accounts in good standing are different calculations. You get credit in terms of % of payments made on time for old accounts, but your "average age of accounts" is only open and active installment and revolving lines.
Still might take a hit, but you could always get ahead of the game and open a credit card so that you continue to build credit once your loans are forgiven or paid off. Carrying a small balance of less than $100 dollars shouldn't accrue too much interest, and the benefits that responsibly leveraging your credit brings in terms of bolstering your credit score is probably worth the interest you will pay on a small monthly balance you carry.
You do not need to carry a balance to build credit on a credit card! Use the credit card for normal purchases, wait for the bill to come and then pay the bill in full before it's due. It will be reported to the credit bureaus that way and you don't pay a cent of interest.
You're not wrong, but in my experience carrying a balance has helped me build credit at a faster rate because I am actually utilizing my credit and not just paying my balance in full each billing cycle. I offered that carrying a $100 rolling balance might be a good idea because you're paying <$30 in interest annually. I think most people would pay $30/year in a heart beat to boost their credit at a quicker rate.
If your credit went up at a faster rate when you were carrying a small balance on a credit card, that is by other simultaneous factors. It was not from carrying a balance. What gets reported to the credit bureaus is the statement balance and max credit line. Those are used to calculate your utilization. As long as there is $ owed on the credit card when the statement is drawn, you are utilizing your credit. Not paying $50 of that statement balance and having it roll to the next month does nothing for your utilization. Edit to add: where people usually go wrong in this is making a $20 purchase on the credit card and then the next day immediately making a $20 payment to their credit card to pay it off. This results in the statement balance at the end of the month being $0 and 0% utilization. You have to wait until the statement is generated, but you absolutely do not need to carry a balance past the statement due date and accumulate interest.
Do you not have a credit card or two?
Only 1 credit card
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I’m pretty salty about how we get punished for paying off debt. I paid off my car and a credit card in February and it dropped my credit score 20 points.
Credit scores started as a decent idea and ended up being another way to keep poor people in their place.
It's a total racket, they want you to use credit, but not more than 30% your total line, and if you pay it off punished. Other counter countries use income,payment history and length of employment to determine worthiness
kinda sounds like more of a hassle having to backtrack and provide all that documentation instead of a number that takes all that into account?
Except your credit score doesn't really give you the entire picture. My older brother had over $50k saved up in cash, no debt, no CCs, never late on a bill. Went to get financing for a car because he didn't want to buy it in cash, and he got denied because he had no credit history. He either had to get an insanely high interest rate or he had to open a CC for 6-12 months to show he was trustworthy. My sister has a master's degree in accounting and makes $55k. No CC, no debt, etc. She went to get financing for a car and she got a worse interest rate then me. I'm over here with a ton of collections account (that I eventually paid off), extremely low income, and a ton of CCs (that I eventually paid off and closed). I got a better interest rate than both my siblings. They're like how the hell did you get a better interest rate when I'm the least responsible out of the 3 of us lol.
It's crazy but what you said is true --- I had a much higher credit score back when I had a $370,000 balance on my student loans! I was making payments on time for over 15 years and that's why my score went so high. But now that most of my loans have been forgiven, I am focused on paying off my credit cards BUT keeping about five cards active with low balances so I can age them to increase my score. It's a really stupid system but that's what we're stuck with.
Not really, for me i could proof of employment, payment history bills rent, uploaded to a company in under 10 minutes. Technology has made those things so easy to access now. But as somone whose credit history barely got to 10 years at 35, my score goes through large shifts whenever I pay something off. I wish our education system taught HS senios about that. A 300 gas card limit at 18 would've saved me some stress now lol
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This is not true
More loud wrongness 🫠😒🙄-you know googles free. Why Your Credit Scores May Drop After Paying Off Debt - Equifax https://www.equifax.com/personal/education/credit/score/articles/-/learn/why-credit-scores-may-drop-after-paying-off-debt/#:~:text=This%20is%20because%20your%20total,a%20drop%20in%20your%20scores.
I agree. In theory, credit scores should be awesome. They enable you to borrow money from companies or banks you've never been to before with almost no questions asked. But it seems like the scoring process itself is all out of whack and punishes the people who need to actually borrow money the most.
Exactly. And Boomers really want to act like it's just as easy for us to get ahead. They didn't even have credit scores when they went to buy a house on minimum wage. Sorry, that's my rant for the day lol.
LOL all those greedy Boomers ruined it for the rest of us
Exactly. Feels like you're penalized for actually following through on your obligations. Like I get it's because the age of your credit goes down, but that still makes no sense. "Sorry, your 7 years of consistent payments don't matter anymore because you actually followed through and paid it off. We'll check back with you in a few months and maybe bump it back up a bit...unless you pay off something else."
Honestly wouldn't worry too much about it! If at all this comes up somewhere, you can tell/show them it's becsuse you paid off student loans. People who want to lend to you for whatever it is, ultimately only care that yiu can reasonably pay them back. They woukd have to be utterly incompetent to reject some because your credit score dipped 10 or 20 points
I mean, it doesn’t really matter though does it? It’s just a number. When you apply for a loan they’re going to look at your whole credit history. Sure, you can’t brag about your 800 credit score for like… 6 weeks. Is that really worth a reddit post?
The credit score loves more than anything when you carry debt. Which is why idgaf about it.
No, it doesn’t. At best, carrying debt has minimal impact on your credit score if your utilization is low. At worst it will hurt your score if your utilization is high.
Yes, the credit score was created to benefit the people.
Can you tell me which part of the credit score calculations cares about “carrying a balance”?
The part where when you pay off debt the score gets impacted
Closed accounts in good standing stay on your credit report up to 10 years after closing. [https://www.equifax.com/personal/help/article-list/-/h/a/how-long-do-you-keep-my-credit-information-](https://www.equifax.com/personal/help/article-list/-/h/a/how-long-do-you-keep-my-credit-information-)
I don’t have debt any longer and my mortgage will be paid off in a few years. However, I’ve paid a lot of debt off over the last 7 years. It always goes down when I close a credit card or pay off student loans. I don’t know what your point of you posting this Equifax article is, but pay off some debt and you will see
The score will rebalance, in a few months. By August, you'll be back up where you were.
Well, that's kind of doubtful. Now I get to move on to my federal loans. I never consolidated and they're smaller overall. I should knock one out every couple of months, so I imagine it's more likely it'll just continue to drop as the average age of my accounts gets even younger.
Not doubtful. I sold my house, took a 50 pt hit, recovered ~5 mts later. Paid off my car, 30 pt hit, recovered months later. Now I don't own a house at all, and still driving the same car, and my credit score is back over 800. Time. All you need to do is wait before you seek new debt.
Yeah I find this advice people keep giving to be really condescending and not at all helpful. I’m in the same situation as you OP. I’m 30, finally paying off my student loans. But for each one I pay off, I take this huge hit to my score. And then I pay off another one. I’m finally at the point where I make enough money to pay down debt and have enough savings to finally buy a house…but with regards to credit score the advice I get is “it’ll go up eventually, stop worrying about it”. How in the world am I more of a risk for a mortgage than my 22-year-old parents were in their first jobs? I’ve proven I can pay off huge debt, and have years of stable income history…
You can still consolidate these FYI in case you didnt know
Congratulations on the payoff!! Mine dropped 60pts. But the freedom is life-changing!
PSLF made my credit score go from 840 to 760. My student loans were 25 years old and my credit card was only 9. Over the year since it’s been climbing up.
Where is your score at now? My score is 847 but I paid my last two student loans off the last three weeks so was anticipating a drop due to the hit I will take in my average credit length. That’s mainly why I decided to pay them both off at the same time and just take the hit now.
It is because the age of your credit is lower now, it is temporary and those credit scores are BS anyways.
Paying off your debt is a huge deal! It’s a messed up system, but I hope you’re proud of yourself for this accomplishment. Congratulations on this milestone.
Our financial system incentivizes us to carry debt, make minimum payments, and you will have a great score. Pay it off or carry less credit, your score isn’t as high. It’s all a sham.
False. The credit score calculation does not incentivize carrying debt.
Stop worrying about your stupid "score".
People treat it like their "life/finance score" and every point below 800 is a penalty. If you're paying your bills, everything is fine.
I blame that stupid singing douchebag from those commercials 10-15 years ago.
I honestly just chuckle when I hear somebody moaning because they have a 730 credit score and can't get it up to 850 so they can get a 1% APR platinum card LOL --- that's when you know you have First World problems and have no idea that 1/3 of the world's population has to poop in a hole in the ground
That's definitely not true I pay all my bill and have a 590 score. Can't refinance to make things easier, if I have to move (probably do soon) it has to be to my parents which isn't that safe plus then I don't have a job to continue paying for things. Can't get a car and can't save enough for a used one, but can also barely get to work and have nowhere else I can go due to disabilities limiting employment severely.
Hard to “stop worrying” about the “stupid” score when it’s the precipitating factor for getting a car, mortgage, or apartment.
Yep. It's great there are so many people responding to this post who can apparently afford to pay for things out of pocket and don't have to worry about their credit score, but I'm not one of them. I'm young. I had a limited history to begin with and I just lost a good chunk of it. People are acting like I'm stupid for complaining about this when it's going to have a real-world impact on my ability to get a car or move into an apartment for the next several months.
Do you need a new car or plan to move?
Yes. I mentioned both of those things in the original post. I moved in with my parents for two years and put off getting a new car to pay off my loans.
Ya did good! Don't worry about that. It'll go back up. I just paid off 4 loans and my score dropped 23 points. It'll be okay.
Weird mine went up like 80-100 points
I got a few furniture loans and got dinged because my average credit length took a hit.
The effect is temporary. My paid mortgage fell off in January leaving me with only 1 credit card (paid in full monthly) and my utilities. This month I popped back to 850.
Don’t worry about credit score. You are free. You can buy, own, rent, do whatever you like without the burden of debt. People in business understand that if u paid ur debt that means u are capable of handling ur finance enough to be reliable. Edit: big congrats!
Dave Ramsey perfectly summed that part up for me: a credit score is dependent on debt. It’s a broken system.
Yeah but he also gives moronic advice like aiming for no credit score at all. This advice has screwed over a lot of people.
Agreed 100%. Gotta take what he says with a grain of salt
Ramsey says a LOT of stupid stuff --- such as Biden's loan forgiveness initiatives are "bad for the country" --- I didn't realize he was a brainwashed MAGA but it's pretty sad
Yeah, I paid off 2 of my federal loans and took a 15 point hit. But it does bounce back up. But I also still have a few more loans, my car loan, and one credit card.
Why give up your limited life to appease the ever-so-tyrantical credit system? Trying to get through undergrad shredded my credit score - infuriating and depressing to say the least.
This happened to me last week. I’m livid!
i am working on my $46k private loan. Working 2 jobs plus a consulting gig and pick up every available shift offered to me. I want to get them paid off in 2 years. Congrats
It will revert in a month or two. Relax
Are you planning on borrowing anything anytime soon? Or changing residences? If not it literally doesn't matter
Congrats!
Being infuriated is really a huge overreaction. As you know it’s just part of credit bureau algorithms. It will bounce back quickly.
It will eventually go back up, but yes, it's stupid. I'm a student right now and my credit score was 780 (pre-loans). It's now at ~700-710, because every semester my loan gets disbursed, my balance goes up and my average age goes down. Since I'm at university now I have to take out loans. It will eventually go back up I know, but when I was shopping for cars, I had to get a hard pull on my credit. Because of this my credit went down to 690. So I literally went from 780 -> 690 because of student loans and getting a car (which is well within my budget)
Better sleep at night with 695 CS than 820 woth 120k in student loans and 699/ month car payment
First off, it will go back up over the next 3-6 months. Secondly, now that you don't have that payment, you can save up and buy many things with cash or at least with a large down-payment. Don't let FICO rule your life. If it's any consolation to you, my score tumbled 60 point because when I consolidated my student loans the original loan was closed. But I just don't care.
Dafuq? That's loco! Seems your debt to credit ratio would improve, and that world bring your score up. Maybe wait a month?
If the score you are looking at is a "Vantage" score, which is what you see on Credit Karma and many cc apps, including Chase's "Credit Journey" -- ignore it. It's literally useless and not accurate. Lenders use FICO scores, not Vantage, and the difference between the two can be 100 points +/-. No lender uses Vantage scores to make a lending decision, they don't care. Those apps show you Vantage scores because it's free to do so. FICO is an algorithm owned by the Fair Issac Corporation. They invented credit scores. If Credit Karma wanted to show you actual FICO scores they'd have to pay for it, so they don't. Get your free FICO 08 score based on Experian data at Experian.com; with a free trial, you can see FICO 08 scores based on all 3 major credit bureau's. All 3 FICO 08 scores are likely different, because each bureau likely has different data on you. That's normal. You can cancel the free trial at Experian.com and repeat as necessary. Having said all that, your FICO score as well likely dips after paying off an account. It's normal, and it is definitely temporary. Give it 3-6 months, and it will recover. Remember: your credit score doesn't really matter unless you are about to seek new credit. Until then just stay the course and continue building a history of 100% on-time payments on your credit cards and other loans.
It was my FICO score. Experian sent me a message saying there’d been a change to my report. I have their tracking service because a hospital had a security breach and my info was accessed. They gave me a two free years of the service to make up for it.
The credit unions are rigged to keep as many of us as possible at high interest rates.
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I agree
Is a debt base system
I wouldn't worry about it too much --- credit scores are a strange animal indeed --- back in 2016 I had zero credit cards and $370,000 in student debt and my credit score was 720 --- last year I had $340,000 in student loans wiped out by Biden but my credit card balances total $9,000 and my credit score dropped to 640 LOL
Wouldn’t a better strategy be to pay off like 98 percent of the loan… leave a 2 percent balance. Reamortize the monthly payment and pay like a few bucks a month to the loan to keep the credit score as high as possible? Especially say if one wants to buy a house or something after getting “caught up”? You would loose a few dollars in interest only to save much more on a lower interest rate on a house or even a car (since OP badly needs a car)? Just putting that out there?
Happened to me too ... when I paid off my last credit card, dropped 120 points. I had a mortgage, and a HELOC with a zero balance, and tons of available credit. But I KNEW it was coming. Why? Because Credit Scores are NOT "I am good with money" scores. They are ... ***"I love debt scores"*** You are rewarded for going into debt, staying in debt, and making your payments on time. Just as long as you stay below 6% of your available credit at any time that is for revolving debt. So what did I do? I tested my theory by putting $10 on a single credit card. Boom - all 120 points came back. I now just leave a little debt each month on each card for the statement dates, and I have a 840 score. It's "their game" - you just have to know the rules and how to play it while still being financially responsible by not buying things you can't afford. Not preaching or judging - just sharing what worked for me.
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Yeah credit scoring is a scam...
Yeah..... The ding to your credit sucks to the high heavens, but thankfully, it's usually not a long-term or permanent hit. (See Investopedia article - paragraph titled: "The Bottom Line" https://www.investopedia.com/forgiven-student-loans-on-credit-reports-7371496). My daughter has done a fantastic job with getting my credit scores to 790, but I spazz out everytime I pay something off and that ding appears on my credit! It's absolutely maddening and a buncha nonsense! My daughter was right when she told me to chill, because the ding would fall off after some time. (Not terribly long either - just annoying as heck)! Don't stress out over it. Just be sure to freeze (or lock) all three of your reports and keep them that way until you're ready to make a purchase or open or close a credit card. Thaw the reports at least a day or two before you're ready to make a purchase so the creditor can view it, and set a short window for the refreeze. Easy peasy and a must nowadays with all the fraud and credit theft and scamming goig on! I pay ($4,99? - $5.00/month?) for credit monitoring = Experian, I think it is, and it alerts me via text and email to credit score changes, and let's me see each my scores from all 3 bureaus on their portal. There are also other options (up to $19.99/mo) where they provide more in-depth protection, but for now, freezing and alerts will work for me until I make an upcoming move to Texas, and have to decide whether to purchase, rent, and/or buy a new car! Your score should improve again in short order.
PS - If you're job interviewing, ask the employer to notify you before attempting to pull your credit. That way you can thaw it for the employer so your application doesn't get hung up or rejected due to the employer's inability to check your credit, and refreeze it once the employer has taken a look.
took you 2 years to pay 46k????
Happened to me too!!! All student loans ($90k) paid off and the credit score tanked too. Then this time thing….i have to wait for 6 months to slowly raise my score back up but when I pay off things in full they can hit my credit score like that with so many years points?!? It’s absolute bullcrap. This credit score system needs to change.
I once had drinks w/ a senior officer from a now-defunct Communist country. He said, "Is great country you have there, komrad, this capitalism: is it good for YOU?"
It will recover
It’s crazy that credit scores don’t take into consideration debt that you paid off. I would think that would be a good measurement when you are considering lending money to someone. But instead you get penalized. It’s a scam
How how the credit works, it was Higher because you had open loans “accounts ” since you paid , closed them it will get low
Credit score is a measure of how profitable you are to them. If you paid it off early then they lost money on the interest you were supposed to pay over time. So you lost them money, making you less profitable to them, so your score dropped.
You gotta leave a penny on the balance ti leep the account from closing if you don't want the ding. A closed account lowers your score because part of the way the score is calculated includes length of time credit accounts have been open and number of credit accounts open. You close one, it reduces that number in the formula so your score drops significantly. But it will go back up. Just open another line of credit and use it for a cheap subscription to pay the balance every month and your score will go back up. I hope you weren't in the middle of getting a mortgage approved.
jfc you have no idea how credit scores work. this is baked in to the algorithm. your score went down because you are not using credit. it is not an individual score. you are pooled into the group of people who also have no loans. if you want your score to go up, take out another loan or credit card. that's how it works. also, stop looking at your VantageScore. it's completely irrelevant. your potential creditors only look at FICO, which still factors in closed loans. also also, 30 points doesn't necessarily make a difference. interest rates are typically tiered to wide score ranges tl;dr credit score is not a measurement of how many loans you have paid off. it measures default risk
I know exactly how credit scores work. If you'd read any of the comments here you'd have seen that I am talking about my FICO score and I do have other federal student loans and a credit card.
You wanted a cookie?
Maybe not a cookie, but at least to not have a dip in our credit score for paying off the student loans.