Overhaulin'

My credit score recently dropped,I have paid off my car loan and got a new car, shouldn't my score go up?

I had a car that i owed $15000 and i paid it off and got a new car for $22000, so in all i owe $21000. My question is, does the old car account i paid off account for something? I don't have any outstanding balances in my CC I always pay it off every month. I got hit for 22 points, I didn't know paying off balances would hurt my score that much.

Public Comments

1. payoffs dont count for much, and now you have taken on more debt, so your debt-to-income ratio has increased and that is what affects your score. not to mention that inquiries on your credit record knock your score down also, but should rebound in a few months when the reporting agencies see that you did make the purchase of another car. you may want to carry some manageable balances on your credit card. they dont really like it when you carry a card that doesnt have an outstanding balance or pay off your balance every statement. it's good for you to do that, but doesn't really benefit them because they don't make interest that way.
2. If you paid off the $15,000 and didn't do anything else, yes, your score would have increased. By taking the $21,000 loan you've now got an even larger debt so your credit score went down.
3. Yes when your purchase something on credit (dumb idea) it will temporary pull your score down. Once you pay down from the high credit score will raise
4. Paying of your credit cards did not harm your score. If you have made that a practice, it is a no change situation. Paying off your old car loan may have been accompanied by a drop in some other account balances, like your checking account. That is not normally an event that affects you score much. Taking on new and larger debt clearly does increase your risk as a debtor, so you would expect a lower score.
5. Not really, since you acquired *new* debt. It looks like you may want to check your debt to income ratio out as well. It is good to keep it under 20% if you can. That and making on-time payments should bounce your score back up. Good Luck!