I have a question about something, please

[Marthe48]

I paid off a loan last month. The payoff was reported today, and on checking my credit score, it's dropped 12 points since yesterday.

I remember hearing that paying off can lower your credit score, but I don't understand why. Can anyone explain? Thank you.

[question everything]

1. One explanation is that if you don't have a loan, you do not generate a record of payments

which are a major factor in credit scores.

[Marthe48]

3. I had friends with no credit score

because they paid cash for everything.

Is there an entity that records other aspects of your financial history? I'd think if someone was trying to borrow money, the lender would be interested in your assets as well as your borrowing history.

I think I just wanted a reward for paying off the loan.

[3Hotdogs]

5. That is true for not having any loan. The loan in question, seems to be a personal or maybe auto loan.

When those are paid off, there is no available credit to "tap." FICO is based on the % of credit that is available and being used.

Have. 10,000 of credit card available and don't use any, credit score is 800+.


But to get in the weeds, there are other factors. How old is the available credit? Older credit lines are better than newer ones.

Do you have any late fees or judgements on your record? Have you applied for any new credit?

But here's the best piece of advice: Forget about the credit and pay cash for as much as you can.

[Marthe48]

8. It was a car loan

I got a car last summer, was able to pay it off last month. I have a balance on one long time credit card. We paid everything on time, for many years. My credit score is high, but paying off the car has no reward, except my budget let out a sigh of relief
Thank you for your reply

[3Hotdogs]

10. Paying it off, had a more important benefit: You stopped paying money to the car loan company.

Borrowing money - taking out a loan, whatever phrase you use, ultimately wastes money. Your car cost you a thousand or two more than the price tag on the sticker. Your lunch costs two or three dollars more because it was on the credit card. That new pair of shoes or the new jacket costs us ten or 15 dollars more than if we put it off or a month and paid cash.

I hope this helps you put credit in a new light.

[lastlib]

13. My grandfather once told me that paying interest (or rent)....

...was like buying a dead horse. You pay the money, but got nothing to show for it. I took it to heart. I bought a car two years ago, with a 6-year loan at 8.6% interest. Would've cost me $12,000 to pay it on the bank's schedule. I paid it off in eight months, and saved almost $11,000. That's worth more to me than any arbitrary credit score.

[Marthe48]

14. I use my credit card for gas

My next target is to get it down to zero balance, and pay off monthly, ahead of any interest charges. Maybe I can the balance as soon as the charge is added. That sure would avoid the interest cost! I always think before I buy, esp. a sale. If I use a credit card, I lose the savings.
My husband was amazing at saving on interest, especially mortgage.

[stopdiggin]

2. more accounts (that are active, paid regularly and on time)

is the desired metric. And beyond that I can't offer much as far a rationale ... Just what they've decided.

[Marthe48]

4. It's a labyrinth

I hear warnings not to sign up for credit cards at the check out, but then I hear the more credit you get, the better your credit score. I try to use cash when I can because money is easier for local businesses, their employees and all to get it working for them faster.

I decided probably 20 years ago to keep my finances as simple as possible, so I could keep track of everything.

Thank you.

[3Hotdogs]

11. That is because the company gets to ding the merchant. And better, if you don't pay it at the end of the month, they

earn two ways.

[doc03]

6. Your credit score is opposite of any common sense. You pay your bills it goes down, you

go out and get a couple more credit cards it goes up. I got a notice from my car insurance company
a few years ago saying if Improved my credit score by borrowing more money my insurance premiums would go down.

[progree]

7. I have trouble with cash payments - actually I prefer to pay cash, but

Last edited Wed Jul 2, 2025, 08:24 PM - Edit history (1)

but my local ATM only spits out $100's. At fast food places, if I pay with a $100, they blanche and disappear with the $100 to some back room for a while like they had to discuss this first with the treasury secretary and Jerome Powell at the Federal Reserve or something. Even $50's. But I have to break $100's somehow.

I read articles about how stores don't like $50's and $100's, and some won't accept them.

So tired of this shit.

So I just pull out my credit card and let the store eat the damn 3% or whatever swipe fee. And some stores like that - it's much quicker for the store (and me) if I just hold up the card to the card reader for a second than to piddle around with greenbacks and coins.

But some are charging extra for card payments, sigh. Or giving discounts for cash only.

And most self-checkout are no-cash, card-only, in my experience

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That ATM that spits out only $100's -- well that's if I ask for $100 or $200 or $300. I've learned a different routine: Ask for $180 (remember to press "Other Amount" button first) - then it spits out a $100 bill and four 20's. Then I do it again (I feel guilty if someone is behind me in line). So I end up with two $100 bills and eight 20's.

I don't like the personal security implications of this.

I don't have a car, there's no other ATMs that don't charge a fee within walking distance.

Even with a car, I was none too thrilled to walk out of the store to my car in the parking lot. There are people who follow people who just left an ATM machine -- it's called "jugging". A combination of "jug", as like carrying a jug of cash, and "mugging"

On the personal security - I could do $80 at a time but too many trips to the ATM that I don't go to much anymore.

And there is no freaking way I'm going to make extra trips to the ATM just to save the store (I'm not that altruistic), or myself the swipe fee (I value my time a lot more than spending 10's of minutes to save a couple dollars).

Grocery trips are almost always over $100, and since I walk to the store a long distance, I'm not thrilled with carrying $200.

And then there's the damn change (coins) issue. If I just pay in paper currency, the coins pile up at home. If I get rid of some change, well that's an extra time-consuming step. At a fast food place, as soon as I pull out a coin purse, the cashier gets busy with another task right away.

That's my rant for tonight.

[Marthe48]

9. My ATM offers 20s and 5s

I would ask for $215, so I'd have tip money. During the Covid lockdown, getting any small bills and coins was hard. I got in the habit of cashing 20s for purchases under $5, just to get the small bills. I don't mind hanging on to coins. I had a bunch piled up a few years ago and asked my grandkids to wrap it, showed them how. When the were done, I divided it between them. They got over $40 each. I happened to be at their house a few days later when their dad saw the rolls of coins. When he asked the kids about them, they said Grandma had paid them for work. He asked what work, and they said, "Wrapping coins!" The look on Dad's face was priceless. It was a cornball moment and I enjoyed every minute. I haven't saved that much in coins since.
I do all I can to avoid paying fees, especially when I'm paying bills. Businesses must have people up all night trying to figure out ways to gouge another dollar from our pockets!

I read about jugging. I'm watchful by the ATM I use, and I usually just go in the bank to the teller. I'm on high alert as I walk back to the car. I lock the doors as soon as I get in. You don't have a car, hope you don't have to walk too far.

[3Hotdogs]

12. Me? I go to TD bank on the first or second of the month. I withdraw $50 in 1's, 360 in. 10's and

$300 in 20's.

That takes care of eating out plus tips, gas where there is a charge for credit cards and most repairs that are done at the house or the car. Most months, there are no repairs so what is left over, goes into savings. Then it goes into investments.

I use credit cards. I use them when I get gas and get 4 or 5% back.AND there is no extra charge for using the card. I use credit at the food market where I get 3% back from a different card. I pay it all at the end of the month.

It is the end of the 2nd day of July. My outstanding credit card balance is now at $62.66. It will reach several hundred at the end of the month. On August 1st., the balancer on the three cards will be $.00.


Good luck.

P.S. My house ain't gonna be featured in "Better Homes and Gardens." My car is not a babe magnet (neither am I). But both are paid for and my net worth is over $1m and with an income that never reached over $90k.

I am now retired.

[Marthe48]

15. You're making the cards work for you

I'll bookmark the post for reference.

I'm doing ok, but the cost wasn't worth it.