How much does paying off a car loan hurt your credit?

I've read that paying off your car loan early can actually damage your credit. Is this true? How much would it fall?

While paying off your car loan can give you more financial flexibility, it’s true: your credit score can take a minor hit.
Your credit score drops after you pay off your car loan because of many factors, including:
  • You already have a thin credit report so that closing a loan affects it more readily
  • Your credit mix, or the mix of revolving and installment loans, changes
  • The length of your credit history is lessened
As a result, you may not want to pay off your car loan in full just because you have the opportunity. If you’re planning on making a larger purchase, you may want to reconsider beforehand so you don’t damage your credit score.
With that said, you can save money in other ways. Check out the Jerry app to compare car insurance quotes so you get the best rate for your coverage needs.
Eric Schad
Answered on Nov 03, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.

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