Paying Off Loans Can Hurt Your Credit Score

Many people work hard to pay off their loans. They think paying debt makes their credit score better. But a credit expert says this is not always true. Sometimes, paying off a loan in full can actually make your score go down.

This happens because of how credit scores work. Lenders want to see a history of managing different types of credit. When you close an old loan, you lose that history. It can also change your credit mix. Having different kinds of open accounts, like credit cards and installment loans, helps your score.

The expert suggests keeping older accounts open if possible. This shows a long history of good payments. Before paying off a loan completely, understand the impact. Think about how it will affect your credit history and your credit mix.

Your credit score is important for loans, housing, and even jobs. Make smart choices with your money. Know all the facts before you act.