Does paying off a car loan raise your credit score?

I’m so close to being done with my car loan. Does paying it off early raise my credit score?

Answer
Nice job keeping up with your car payments all these years! Paying off your car loan will likely cause your credit score to drop a few points temporarily.
An auto loan is a long-established account that you have hopefully kept in good standing, which is a positive sign for future lenders and the FICO credit score formula. Once you close the loan account, the average age of your credit history and your mix of use may drop. These both factor to a lower credit score.
Despite the slight credit drop, you will save money on a car payment when you pay off your loan. You can also save money on your car insurance. Lenders require you to carry full coverage car insurance when you’re financing a vehicle, but once you pay off the loan, you can choose to change your coverage.
If you want to change your coverage or shop for lower rates, try the number-one-rated car insurance app, Jerry. Jerry compares personalized quotes from over 50 of the nation’s leading providers, including Nationwide, Allstate, and Travelers, so you can get the coverage you need at a great price. The average Jerry driver saves $879 a year on car insurance!
Congrats on finishing your loan!
Matthew Macgugan
Answered on Dec 01, 2021
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