Paying Off Loans Can Hurt Your Credit
A credit expert says paying off old loans early may secretly hurt your credit score.
Many people try to build a good credit score. They think paying off debts quickly helps. But credit expert Micah Smith warns that paying off installment loans early can actually lower your score.
Installment loans are things like car loans or mortgages. You pay a set amount each month. When you close these accounts, they no longer show active payments. This can make your credit history look shorter. Lenders like to see a long history of on-time payments.
Smith explains that keeping older, paid-off accounts open shows your ability to handle debt over time. This makes you look less risky to new lenders. It shows a good payment pattern.
So, if you pay off an old car loan, it might seem smart. But your credit score could dip a bit. A higher score helps you get better rates on new loans. Consider this before closing out older installment accounts.
Source: Fox Business
