Paying Off Loans Can Hurt Your Credit
Paying off your loans could actually lower your credit score, a credit expert warns.
Many people work hard to pay off their debts. They think this will always help their credit score. However, a credit expert, Micah Smith, says this is not always true. Paying off an installment loan can sometimes hurt your score.
An installment loan has a set payment schedule. Car loans and mortgages are examples. When you pay off one of these loans, the account closes. This can reduce the number of open accounts you have. A shorter credit history can also impact your score.
Credit bureaus like to see a mix of credit. They want to see that you can manage different types of debt. They also like long, positive credit histories. Closing an old, well-managed account can make your credit history look shorter.
Smith says improving your credit in 30 days is possible. But you need to understand how credit scores work. Simply paying off a loan may not be the best strategy for a higher score.
Source: Fox Business
