Last month I paid off an installment loan. Every payment on time, never missed a payment. All other credit accounts decreased last month. But when I paid off the installment loan, my credit plunged from 741 to 699!! Can anyone explain this? I am livid! I thought my score would go up. I know they like to see a mix of account types but how can it be that paying off a loan tanks my credit?!?
It has something to do with utilization of available credit. By paying off the loan, that available credit is no longer there. The installment loan should show as a closed account with satisfactory payment record.
Watch your credit score and your credit report for several months. You should see it creep back up.
10% of your credit score is based on the credit mix that you have. So the closing of a loan thus can contribute to a lower score.
As @JPW050 indicated your score should increase within a few months and it is a good idea to check you credit report. Make sure that no other changes occurred, including an error on your report, that may have contributed to the lower score
Yep – I paid off my house – credit score dropped, then slowly recovered but not to what it was. Paid off my car, same thing.
I guess they want you always to have debt.
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If it wasn’t for debt, they wouldn’t exist. 
So true. The good news is that the long-term effect of a limited credit mix tends to be minor. My score hovers around 800 and the only credit I have is credit cards.
Fold away all credit knowledge, this can’t be realized in actuality in a perpetual calendar of how the credit gods will rule your credit score. The only information that is has a good perspective is a credit score is insighted on how much credit is given in comparison to how much credit is used as well as what kind of credit is dispersed unto you. This includes an assorted mix of credit which includes car loans, personal loans, and credit card loans. This will include any long term loans. Any way you angle your perspective credit scores measure the relation of debt acquired, how much debt you have and the category of credit given. Categories include credit card limits on each account, personal loans, car loans, helocs, mortgages, as well as any long term loans. Anything that would be included as debt. Keep in mind if a debt is paid in full it is no longer credit issued unto you. It is just a paid in full status. Credit is zero on that balance as well as debt is nothing as well. Result equals a lowered credit score because it no more in a relationship with credit. Paid in full is just that. “PAID IN FULL!”
I found this out the hard way. [like how I learn everything] For reasons that go back decades, my Chase card had a $10K cap. No idea why–can’t remember.
Some time back, I reduced it to $2k, and no plans to even use that. Sure enough, a $500 charge meant I had used 25% of my available credit, and I took a rating hit.
Called and the rep understood, and cranked it back to $10k.
Ah, credit score recovered…
IOW… it’s a rating of how promptly you pay your bills.
Hopefully it recovers as others said. I only have credit cards and have credit scores at various bureaus well over 800 so you don’t have to have loans for the highest scores.
I do have a high limits (>$100k in total) on my credit cards that I barely utilize so I bet that helps. Thinking you should only have 1-2 credit cards and low limits for “safety” will lead to a lower credit score.
Good luck but don’t sweat it.
It helps a lot, along with paying the full bill on time.
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