Will paying off your auto loan help out your credit score?
Now that you know that less debt is way better when it comes to credit scores, you might be tempted to think that paying off your auto loan will boost your score. But it’s much more complicated than that.
As a matter of fact, paying off a car loan might cause a temporary dip in your score. That’s mainly because the moment you pay off your auto loan, the account on your credit report closes.
So even if a closed account is factored into your credit score, a positive open account has a better impact. Lenders would rather know how you’re MANAGING credit now, than how you did. Any drop might be short-term, and might in fact drop your score by a couple of points.
