A woman’s credit score nightmare has sparked outrage and confusion. She says she had the frustrating experience of watching her credit score plummet by over 100 points after what should have been a financial victory—completely paying off her six-year car loan. The 2-minute and 40-second video, which has garnered over 5,400 views since being uploaded on Oct. 5, shows Diamond (@diamond_513) speaking directly to the camera from inside her car. Her frustration is palpable as she explains how paying off her car two months ago led to an unexpected credit score drop, followed by American Express reducing her credit limit by $2,000. "So I paid off my car two months ago and my credit score went down a lot. It went down a lot," Diamond says in the video. "And then just last week, maybe two weeks ago, my credit card company, American Express, had sent me something that said they were going to review my limit based on factors like my credit score and some other, I don't even know what it said. But they reduced my credit limit by $2,000." Why Credit Scores Drop After Paying Off Loans Diamond's experience, while frustrating, is unfortunately common and reflects how credit scoring models work. When you pay off an installment loan like a car loan, your credit score can temporarily drop for several reasons. First, your credit mix changes. Credit scoring models like FICO consider the variety of credit types you have—credit cards, mortgages, auto loans, and other installment loans. Having a diverse mix of credit types accounts for 10% of your FICO Score, and managing them well demonstrates creditworthiness. When you close an account by paying it off, you lose that diversity. Second, the age of your accounts matters a lot. Diamond specifically mentioned that her car loan "was my oldest account" and "the second thing I ever got." Length of credit history accounts for 15% of your FICO Score, including the age of your oldest account and the average age of all accounts. Third, when you have only a few credit accounts, every open account benefits your credit score. Closed accounts that were always paid on time can positively impact your credit, but not as much as open, active accounts. OWNERSHIP STORIES Viral stories from across the web Our team of experts tracks what owners are saying about car-shopping, repairs, the daily driving experience and more on social media. The timing couldn't be worse for Diamond. "I'm trying to sell my house. I want to sell my house at the end of this year and buy a new house," she explains. "My oldest will be going into high school. And my youngest will be going into middle school. So I'm really trying to find somewhere that I want my kids to be able to graduate from." The Credit Utilization Double Whammy Diamond's situation got worse when American Express reduced her credit limit. "They reduced my credit limit by $2,000, which is fine. But now, then it messed up my credit utilization," she says. Even if Diamond's spending remains the same, the lower credit limit means her utilization percentage increased, which negatively impacted her score further. This is because the percentage matters, not the dollar amount—the same balance on a smaller credit limit creates a higher utilization ratio. Credit utilization accounts for about 30% of your FICO score. Experts generally recommend keeping utilization below 30% on each card, with below 10% being ideal for the highest scores. Community Rallies With Advice and Shared Experiences The video resonated strongly with viewers, many of whom shared similar experiences and offered advice. One commenter, identifying herself as having a background in finance, offered reassurance, writing, "Your credit score will go back up—and likely even higher than before. The drop is only temporary because part of your credit score is based on your credit mix." Another user also offered practical advice: "Just keep your cards under 20% utilization each card—not across all cards, but yeah if you can go to Navy and get a pledge loan, so what you do is take the loan and pay most of it back and the last few months just pay it off that will boost your score." However, not all experiences were hopeful. One commenter shared her own struggle: "I'm sorry to give you bad news, but I had a great credit score. I paid off my student loans and my score dropped A LOT. That was almost a year ago and my credit score is still not that great." Diamond responded to several comments, expressing her frustration with the system: "For real it definitely feels like a scam and a punishment to not have debt?!" A particularly pointed comment came from user PAGGY: "your realtor or lender should have told you not to pay off the car until you were gonna close on the house." This highlights a common oversight—financial professionals sometimes fail to warn clients about the potential credit score impacts of paying off loans before major purchases. Will Her Score Recover in Time? Diamond faces a tight timeline, needing her credit score to recover within about eight months for her house purchase. "What am I supposed to do for my credit score? Because I have about, like, eight months to get my shit back up to, like, 700 or 800. Is that going to happen?" she asks. The good news is that most experts in the comments suggested her score should recover within this timeframe. One commenter reassured her: "About 8 months from now it will be back up," to which Diamond replied, "That's the time frame I need!" This aligns with credit expert guidance—credit scores typically bounce back within one to two months after paying off an installment loan, assuming responsible credit management continues. The key for Diamond will be maintaining low credit utilization on her remaining accounts, continuing to make all payments on time, and avoiding opening new credit accounts that could trigger hard inquiries. Her paid off car loan will remain on her credit report for up to 10 years as a positive account, showing future lenders that she successfully managed and repaid the debt. According to the Consumer Financial Protection Bureau, positive payment history may continue to be reported after a loan is paid off and even after the account is closed. While the immediate impact was negative, this closed account in good standing will ultimately benefit her credit profile long-term. Motor1 reached out to Diamond via TikTok direct message. We'll be sure to update this if she responds. We want your opinion! What would you like to see on Motor1.com? Take our 3 minute survey. - The Motor1.com Team
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