Sold my car and cleared off 26K of debt and I'm rewarded with a lower credit score?!?

So in an attempt to be more fiscally responsible before I enter my 30s I sold my second car to clear debt of about 26k and save money. My score probably lowered because the average age of my loans now shortened.

You'd think I'd be rewarded with a higher credit score because I'm trying to be debt free

So in an attempt to be more fiscally responsible before I enter my 30s I sold my second car to clear debt of about 26k and save money. My score probably lowered because the average age of my loans now shortened.

You'd think I'd be rewarded with a higher credit score because I'm trying to be debt free but I guess all the banks see is someone who doesn't want to be riddled with high debt and interest payments..the american way I guess.

Seriously! What can I do to increase my score fast? This has implications for my career I'm trying to enter into and a future home purchase!

Best Answer:

Matthew: A credit score is derived purely by formula, so by definition, it doesn't take individual circumstances into account. Everybody is treated the same, so you are not being mistreated.

That said, your score likely dropped (temporarily) for a few reasons. The age of your credit may be lower if the car loan is older than other loans. You also now have less credit available, which means that your percentage of credit used is higher, even if you owe less money. And, you now have a narrower mix of credit (you probably have fewer types of credit by closing a car loan). You raise your score by: paying all of your bills on time, every time (you control this and it's the biggest factor in your score); having a long credit history (this just takes time); using a low percentage of available credit (you do this by a combination of not racking up debt on open accounts, and by having higher credit limits); having a mix of credit (credit cards, a car loan, a mortgage, etc.). You can ask your current credit cards to increase your limits, though they may not do so with a recent drop in your score. If they decline, ask how many months you should wait to request a higher limit again. The trick here is to not use any of that increased limit. Having a wider mix of credit is a small factor, so I would not recommend that you take out another car loan or mortgage just to develop your credit mix.

As others have said, it takes time to build a credit score. Keep paying your bills on time and use very little of your available credit, and the score will increase.

Other answer:

Matthew:
Nobody put a gun to your "fiscally responsible" head and made you buy a car you couldn't afford. That's on YOU, stop blaming everybody else. If you want your score to increase, just pay your debt, don't add any more, and it will increase over time.
Pat Wooden:
Read the article from Forbes linked below for quick fixes to your credit. It seems that what might have happened in your case has nothing to do with the age of the loans, but the percentage of available credit that you use. Now that you have less debt, if you charge the same amount you have been, you are using a higher percentage of your available credit. One way to resolve that is to ask for an increase in your credit card limits (provided your charges don't increase!).
R T:
Without knowing everything in your profile, it's difficult to say. Go to http://www.Creditkarma.com and look at your scores there. They will list the "high impact" factors and show you where you stack up.

Raising your score can be a little frustrating at times. If you don't have many lines of credit open, you can get dinged on that. If you open another line of credit you get a hard inquiry so you get dinged for that. The bottom line is you may have to take a few hits to get the ball rolling. Also, a big factor is TIME — how long a credit history you have. There is no way to speed that up.

I have a score over 800. It took me years to build it . . .

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