Why did my credit score drop after paying extra toward principal?

I recently made an extra payment toward my car loan principal, but my credit score dropped from 760 to 750. Here’s the situation:

  • I have a simple interest loan. When I make payments, I can choose to apply extra money toward the principal.
  • My monthly payment is $390, and my balance was $17,800. Last month, I paid $1,700 in total (regular payment + extra toward principal).
  • My credit score dropped 10 points after this payment.
  • The loan started at the end of July.
  • I’ve been making extra principal payments every month, and my score went up the previous month.

There are no negatives on my credit cards, and both are under 20% utilization. Why would my score drop this month after making extra payments?

A 10-point drop is insignificant. Credit scores often fluctuate by small amounts due to minor changes in utilization, account activity, or the credit scoring formula. It’s nothing to worry about.

This is like worrying that your fried rice has 10 fewer grains than last time. A 10-point change in your credit score is negligible and doesn’t matter in the grand scheme.

A 10-point difference doesn’t matter unless you’re about to take out a major loan. Keep paying your debts on time, and your score will be fine in the long run. Try not to overthink small changes.