Paying Off Loans Can Hurt Your Credit Score

Many people try hard to improve their credit scores. Some aim to boost their score quickly. Micah Smith, a credit expert, says this is possible. You can see a big jump in just 30 days. But Smith also shares a surprising truth.

Paying off installment loans early can sometimes lower your score. An installment loan is like a car loan or a student loan. You pay a set amount each month. When you pay it off completely ahead of schedule, your credit mix changes. This change can negatively affect your score.

Credit scores like to see a mix of different loan types. They also like to see a long history of payments. When an installment loan closes, its history stops growing. This can make your credit report look less robust.

This does not mean you should never pay off debt. It means you need to know how it might affect your score. Understand the rules of credit. This helps you make smart money choices.

Source: Fox Business