What happens with my credit report after I pay off a car loan?

I just paid off my car loan about a week ago. Will this impact my credit report?

Answer
Great job on paying off your car loan in full! You no longer have to worry about a monthly payment, so that’s something to get excited about.
As far as your credit report goes, you might see a small drop in your credit score after paying off the loan. While this may seem counterintuitive, a slight drop is actually normal. Your credit score can drop for any of the following reasons:
  • You technically closed an account by finishing your loan payments
  • You don’t have any other installment loans, so ending the loan can affect your credit mix
  • You had limited credit history to begin with
You don’t need to worry about this temporary drop. Most scores bounce back to pre-payoff levels within a few months to a year.
In the meantime, you may want to check your credit report regularly to ensure your statement shows your loan paid off and that your credit score hasn’t significantly changed for other reasons.
After you pay off the car loan, you should consider whether you want to keep the coverage level your lender required or reduce your coverage limits. Jerry can help you find a new coverage level or switch car insurance providers with just a few swipes and clicks.
Eric Schad
Answered on Oct 26, 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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