Does paying off a car loan impact your credit?

I had $15,000 left on my loan that got paid off due to an insurance claim. How will this impact my credit or future loans?

“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.
In terms of future loans, you should be seen as less of a risk by both car insurance companies and lenders.
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. “
Emily Maracle
Answered on May 03, 2021
Emily Maracle is a car insurance specialist living in New York. Originally from the Pacific Northwest, she has a degree in English Literature and a background in customer service. She enjoys cooking, gardening, and living sustainably. In the future, she can't wait to upgrade to a hybrid or electric car.

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