“When you pay off a loan, it can impact your credit negatively. Closing the loan means you have one less account on your credit history, which can reduce your credit mix, or the diversity of credit accounts. The more diverse your accounts are, the better your score tends to be.
However, your credit score will typically rebound after a few months.
Paying off a loan successfully, whether through your own payments or an insurance payout, shows that you are financially responsible. Lenders are more willing to offer loans to those who demonstrate this. “