Has anyone else ever paid off debt only to find that their credit score actually dropped instead of going up?!?! This happened to me recently. I finished paying off $12K of debt at the end of 2020.
I paid off my credit cards in early December, but I’ve kept all the accounts open and have made sure to use each at least once a month. Then on Dec. 30, I paid off the last $800 on my car. My credit score was 778. Then in late February, it dropped to 739.
Admittedly, I knew this was likely to happen. The second Dear Penny letter I ever answered was from someone who paid off their car loan early and then saw their credit score tank by 79 points. https://www.thepennyhoarder.co…-off-car-loan-early/ Sometimes this can happen when you pay off a loan because you reduce your age of credit by closing an old account and your credit mix changes. I also experienced the same thing when I paid off my first car loan, but I had terrible credit at the time and I think the loan was my only credit account.
I think I even said in this community once that I was going to be car loan-free soon and that I didn’t care if my credit score dropped a bit. Gotta admit it: It’s annoyed me a lot more than I thought it would!
Usually, the drop from paying off debt is only temporary. But my score has taken longer to bounce back than I thought it would. I checked it again this morning. It’s at 752, so it’s only recovered 13 of the 39 points it dropped by.
Have any of you community members experienced the same thing? If so, how long did it take your credit score to recover?