Paying Off Loans Can Hurt Your Credit
A credit expert says paying off old loans can quietly lower your credit score, a surprise to many.
Many people try to improve their credit by paying off old loans. But this action can actually hurt your credit score. A credit expert warns about this unexpected problem.
Micah Smith, a credit repair expert, points out this issue. When you pay off a loan, especially an older one, that account closes. Older accounts show a long history of good payments. Closing them shortens your credit history, which can make your score drop.
Your credit score looks at how long you have had credit. It also checks the types of credit you use. Paying off a loan removes a healthy part of that mix. This change can signal a less diverse credit profile. Lenders prefer to see a variety of credit, like credit cards and loans.
Instead of closing old accounts, keep them active. A long history of good credit helps your score. Understand how each financial move affects your credit. This knowledge helps you keep your score strong.
Source: Fox Business
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