Should I pay off my car loan early? How does it affect my credit score?

I got a raise recently and realized I could pay off my car loan. I want to, I'm not sure how it will impact my credit score?

Answer
Congratulations on the raise! I get the desire to pay your car loan off early. It makes sense logically; however, sometimes credit does not respond logically.
If you are hoping to apply for any loan in the near future, paying off your car loan early can sometimes negatively affect your credit. But that’s not guaranteed.
For example, let’s say you want to buy a house. A lender will look at your credit score when you apply for a mortgage, but they’ll also look at your debt to income ratio. The small dip in your score might not be that big of a deal, but keeping your car loan could have a greater impact on your debt-to-income ratio.
This all depends on your personal financial situaiton, which you know best.
Before you pay off your car loan early, take a moment to think about any upcoming significant expenses that might use your credit score. If don’t anticipate any big purchases, then go for it and pay off your loan.
If you want to look at other ways to save money, you should revaluate your car insurance.
You can do this easily with the Jerry app. Jerry compares personalized quotes from up to 50 top insurance companies, including Nationwide, Allstate, and Travelers, and Jerry takes care of the rest. No long forms. No calling around. No hard work. Just savings. The average Jerry user saves $879 a year on car insurance.
Lauren Smith
Answered on Oct 29, 2021
Lauren has written for World Nomads, the Matador Network, Korvia Consulting, and once upon a time Three Fates Games. She graduated from Columbia College of Chicago with a BFA in Creative Writing. After graduating, she moved overseas and lived in South Korea where she spent her free time traveling and going on road trips with friends. She misses the rest stop potatoes and is trying to figure out how to recreate them at home. She's now based outside of Chicago and when she's not writing she spends her free time reading, playing video games, and exploring whenever she can.
thumb-up

Did this answer help you?

Ask us a question by email and we will respond within a few days.
thumb-up

Have a different question?

You can meet us at our office and discuss the details of your question.
Let Jerry’s experts help you find savings on your car insurance!
No long forms or spam · Get quotes from 40+ carriers
Find insurance savings (100% Free)
rating primary
4.7/5 Rating on App Store

Easiest way to compare and buy car insurance

√
No long forms
√
No spam or unwanted phone calls
√
Quotes from top insurance companies
Find insurance savings — it's 100% free