Will paying off a car loan improve my credit?

This is the last month of making payments on my car. Will paying off my car loan improve my credit?

Congratulations on officially becoming the owner of your vehicle! Despite how positive it is to reach the end of your loan period, paying off your car loan will likely cause your credit score to drop a few points for a short time.
Your car loan positively impacts your score because it is a long-established account that you have hopefully kept in good standing. Once you close the loan account, the average age of your credit history may drop, which can lower your score.
Don’t fret. Any change in your credit score as a result of paying off your loan will likely be minimal. And, your score should recover quickly, especially if you decide to finance another vehicle in your name. The bonus: you save money on a car payment by paying off your loan!
You can also save money on your car insurance. Lenders require financed vehicles to have full coverage car insurance, but once you pay off your loan, you have the freedom to choose whatever coverage you want (as long as it means state insurance mininmums).
If you’d like help shopping for lower insurance rates, try using the Jerry app. 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 again!
Matthew Macgugan
Answered on Dec 01, 2021

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