The final payment on my car loan is due in December but I made a payment for the total payoff amount this month to close the account. The only account I currently have open is a credit card. Before I made the payment for my car loan to pay it off my score was high and now my score dropped almost 70 points! The credit report still shows the total balance of the car loan. What went wrong? Why does it still show a balance for the car loan and why did it lower my score? Any information would be greatly appreciated.
Before I answer your question, some information about the credit score:
The credit score you are looking at for free from Credit Karma and Chase is your VantageScore. This is not the same as the FICO score, which is what lenders actually use.
The formulas for both VantageScore and FICO are proprietary secrets, and we can't know for sure what affects your score.
Even at 730, your score is generally considered excellent.
In my opinion, paying off your car loan should not affect your score much at all. However, you have done a few things recently that will negatively affect your credit score:
You applied for a credit card, which resulted in a credit inquiry. (Perhaps you applied for more than one card, resulting in multiple inquiries?)
You are now using 50% of your available credit (credit utilization).
Credit inquiries fall off your report in time, and credit utilization is an instantaneous number with no memory that will improve immediately when you pay down your credit card. Pay off your credit card in full each month, let some time pass, and your credit score will climb again.
One last bit of advice: You've seen it pounded into your head by Credit Karma and the financial industry that your credit score is more important than anything, and they tell you that you need to keep getting more credit cards and loans to raise your score. Don't believe it. There is no need to pay unnecessary interest in an attempt to try to build up your score. Pay your bills on time, and your credit score will be fine.