Why did my credit score drop so much so fast?

[Jgutta420]

What is the name of your state? FLORIDA

Hope this is in the right place...here goes
So my score was a 620...not great but up from what it was (491). I purchased a car with an incredibly high interest rate (27%). Loan was for about 16k. Anyway, kept it for about 14 months will no late or missed payments. Went to trade it and found out my score was 620! I was excited obviously. In 14 months my credit went up almost 130 points. It was good enough to get me a brand new car (never could do that b4) off the lot with a 9% interest rate. I was ecstatic! This loan is about 26k. So that was in March. It's now August and I just checked my score seeing if it went up anymore since I've not missed nor been late on the new car. My score is now 537! Wtf...it dropped almost 100 points and there is nothing new on there besides the car loan.

I don't get credit. How did the other car boost it so much but this one dragged it down significantly? I'm pretty much back to where I started. If applying for and getting approved for credit is going to hurt my score then what's the point? I think from now on I will just buy things cash. If I can't afford it then I won't have it. It's too stressful. Credit is weird and I just don't understand it.

 

[xylene]

If I can't afford it then I won't have it.

This is why your credit has problems.

 

[PayrollHRGuy]

I'd suggest you pull your complete credit report not just the score. You can do this annually for free at https://www.annualcreditreport.com/index.action

 

[Lovingfatherof2]

Estatic about a 9% interest rate?

You aren't good with money or credit, that is ultimately the problem. None of it is complicated.

What you should have done is paid off the vehicle you had and then continue to drive it until the repairs are more than the vehicle is worth. Then get another car that is a few years old (buying new is never a good idea) with a good chunk of money down on the loan.

 

[FlyingRon]

If you want to theorize about the ups and downs of credit scores, try creditboads.com where they dote over such things.
This is not a legal issue.

 

[adjusterjack]

Credit is weird and I just don't understand it.

I'm only speculating here but I think there might be two factors involved.

1. Debt to income ratio. Using $30,000 per year income as an example, your debt to income ratio on the first loan was just a little over 50%. With the second loan it's about 85% which makes you a poor credit risk and is reflected in your score.

2. The amount of time you've been paying on the loan. Your score increased during 14 months of on-time payments. Now you are only 6 months into the new loan.

My guess is that you'll see your score gradually go back up over the next year or two as you get some longevity into the current loan and pay down the balance.

On the positive side, getting the lower interest loan was a good thing. Assuming 6 years for each loan, the $16,000 loan at 27% would have cost you another $16,000 in interest while the current loan of $26,000 at 9% will only cost you about $7700 in interest.

You can use this loan calculator to play around with the figures:

http://www.bretwhissel.net/cgi-bin/amortize

I agree that you should pay cash and avoid using credit. Paying interest is flushing your money down the toilet.

 

[TimStudiesLaw]

I'm only speculating here but I think there might be two factors involved.

1. Debt to income ratio. Using $30,000 per year income as an example, your debt to income ratio on the first loan was just a little over 50%. With the second loan it's about 85% which makes you a poor credit risk and is reflected in your score.

2. The amount of time you've been paying on the loan. Your score increased during 14 months of on-time payments. Now you are only 6 months into the new loan.

My guess is that you'll see your score gradually go back up over the next year or two as you get some longevity into the current loan and pay down the balance.

On the positive side, getting the lower interest loan was a good thing. Assuming 6 years for each loan, the $16,000 loan at 27% would have cost you another $16,000 in interest while the current loan of $26,000 at 9% will only cost you about $7700 in interest.

You can use this loan calculator to play around with the figures:

http://www.bretwhissel.net/cgi-bin/amortize

I agree that you should pay cash and avoid using credit. Paying interest is flushing your money down the toilet.

Fair example, but DTI doesn't come into play with a credit score. Only your accounts (open, closed, charged off, collections, etc.), public, records, high balance, pay history, and utilization are considered in the formulas.

"Your income is not included in your credit report, so your DTI never affects your credit report or credit score."
Source: https://www.experian.com/blogs/ask-experian/credit-education/debt-to-income-ratio/

 

[adjusterjack]

Maybe "high balance" then?

 

[Jgutta420]

This is why your credit has problems.

That's why my credit has problems? Actually that would be the smart thing to do instead of taking on more loans and more debt. What are you even talking about? My credit has problems because of a lot of dumb stuff I did when I was young.

 

[Jgutta420]

If you want to theorize about the ups and downs of credit scores, try creditboads.com where they dote over such things.
This is not a legal issue.

There is one of you in every group. When I searched before I posted, I saw a lot of similar question (none about my post specifically) but similar. So there are a lot of folks on here asking questions about credit trying to get advice. The name of the site is free advice. Not free legal advice. Hence the reason I asked for advice.

 

[Jgutta420]

Estatic about a 9% interest rate?

You aren't good with money or credit, that is ultimately the problem. None of it is complicated.

What you should have done is paid off the vehicle you had and then continue to drive it until the repairs are more than the vehicle is worth. Then get another car that is a few years old (buying new is never a good idea) with a good chunk of money down on the loan.

Yes ecstatic. I went from high 20's to 9. Who wouldn't be happy. And correction...I wasn't good with money or credit. A lot of stupid things I did when I was younger. Now, I'm great with it which is why my score shot up. Just didn't get why it went back down. And fyi, I did pay the car off. Well I traded it but it shows on my credit as a payoff.

 

[Jgutta420]

I'm only speculating here but I think there might be two factors involved.

1. Debt to income ratio. Using $30,000 per year income as an example, your debt to income ratio on the first loan was just a little over 50%. With the second loan it's about 85% which makes you a poor credit risk and is reflected in your score.

2. The amount of time you've been paying on the loan. Your score increased during 14 months of on-time payments. Now you are only 6 months into the new loan.

My guess is that you'll see your score gradually go back up over the next year or two as you get some longevity into the current loan and pay down the balance.

On the positive side, getting the lower interest loan was a good thing. Assuming 6 years for each loan, the $16,000 loan at 27% would have cost you another $16,000 in interest while the current loan of $26,000 at 9% will only cost you about $7700 in interest.

You can use this loan calculator to play around with the figures:

http://www.bretwhissel.net/cgi-bin/amortize

I agree that you should pay cash and avoid using credit. Paying interest is flushing your money down the toilet.

Thank you for giving the o ly sensible non preachy non judgemental answer. I actually make about 75k a year so what I think imma do is pay it off quick. Thank you for the advice.

 

[Just Blue]

There is one of you in every group. When I searched before I posted, I saw a lot of similar question (none about my post specifically) but similar. So there are a lot of folks on here asking questions about credit trying to get advice. The name of the site is free advice. Not free legal advice. Hence the reason I asked for advice.

Read the TOS of this site.

 

[adjusterjack]

Thank you for giving the o ly sensible non preachy non judgemental answer. I actually make about 75k a year so what I think imma do is pay it off quick. Thank you for the advice.

I wouldn't pay it off too quick. Consistent payment over a long period is what will bring your score back up. If you can afford to increase the payments and pay if off in 3 years your score will be up and you'll cut the interest in about half. If you had older negative items, they may fall off the report by then and you could end up around 700.

The ironic part of all this is that a high score makes you a good credit risk but the higher your score the less likely you are to need to borrow money.

 

[Jgutta420]

Read the TOS of this site.

I did....heres an excerpt...


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Keywords being generalized advice and financial. Perhaps you should read it.