has anyone else found it strange your credit score falls if you become debt free?

Question

I was in debt up to my ears (3 credit cards maxed out) house mortgage, 2 car payments and 3 personal loans from a bank, financial institution and the worst "beneficial" and had 827 out of 850 with one over 30 payment, but I paid off all debt, sold house, my one late payment is now over 7 years and gone, but my score dropped to less than 800? why the frustration (WTF)?

Answer 1

I agree with you, it is strange and kind of a racket. But realistically our society is geared to the person who is deep in debt. The bankers love those people and all the interest they're paying. But I wouldn't lose to much sleep over your rating of 800, it should still get you the best rate should you need a loan again.

Answer 2

your score is more prone to decrease than increase. meaning it will decrease in a heart beat but when it comes time to increasing it, it takes some time. this drop in your score is probably the end result of all your credit woes. since your cards were maxed out, not sure for how long, they decrease your score once you get over 50% of the available balance. once you exceed 50% of the total line amount, it sends a red flag to the reporting bureaus and it drops your score for however long you stay above that threshold.

credit is like trying to blow a ping pong ball through a vertical tube. the more you keep huffing and puffing the longer it stays up, once you stop puffing the ball drops. since nearly all your credit i.e. payment history, is gone, your credit has ceased for now. since you don't have anything being reported to the bureaus now your score and credit drop.

I'm sure you know by now how fickle credit is. even though you should congratulate yourself for paying off everything and clearing your debts clean, you still need to maintain some sort of credit continually like a credit card for example. do not assume that paying off everything will boost your score and keep it there for eternity.

Answer 3

Question... When you paid everything off did you close the accounts as well? If you did, your score dropped because you currently have no current credit lines. Credit Bureaus like open credit lines, whether you use them or not. If you didn't close them, the companies which you were paying are no longer reporting anything to the Credit Bureaus. If you have no payments to make, they have nothing to report. I'm surprised it dropped so much, though.

Answer 4

It is strange but sounds about right for our consumer driven economy. You can still have a decent credit score even with no debt.

Answer 5

Because now you don't have enough revolving credit.
Credit scoring is based off a math calculation that is determined by many factors.

Answer 6

if you cancelled your credit cards that would have done it. they go by how much credit you owe versus how much you have available. the more credit that is available to you and you don't carry a balance on it the better your score is.