Paying Off Loans Can Hurt Your Credit Score
A credit expert says fully paying off loans might quietly damage your credit score, a surprising twist for many.
Many people work hard to pay off their debts. They think this always helps their credit score. But a credit expert, Micah Smith, says this is not always true. Paying off a loan in full can sometimes make your score drop.
This happens because of how credit scores work. Lenders want to see that you can handle different types of debt over time. When you close a loan, it removes an active account from your credit report. This can shorten your credit history or change your credit mix. Both factors influence your score.
Smith suggests that improving your score quickly is possible. He notes a 30-day boost is "very realistic." But you need to understand the rules. Simply paying off debt is not a magic bullet. You must keep a healthy mix of credit and manage open accounts responsibly.
To build good credit, focus on long-term habits. Pay bills on time. Keep credit card balances low. Understand how closing accounts affects your score. This careful approach helps your financial health grow steady.
Source: Fox Business
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