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Will paying off my new car loan make my credit score better?
I'm going to pay off my car loan later this year. Will paying it off improve my credit score?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Contrary to popular belief, paying off your car loan may actually lower your credit score temporarily. Reasons include:
- Ending a loan results in a closed account, or one less account to your name
- This “worsens” your credit mix, or the amount of revolving and installment loans you have
- If you already had a thin credit report, each closed account will have a larger impact
You can expect to drop between five and 30 points, but your score should bounce back to where it was previously within a few months to a year.
While you’re celebrating all the savings you’re getting by ending your loan payments, be sure to shop around for the best car insurance rates. Download the
Jerry
app to find the best prices for the coverage you need. View full answer
- Gregory R.
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