Paying Off Loans Can Hurt Your Credit Score

Many people try to pay off their loans quickly. This seems like a good money move. But a credit expert shares a hidden truth. Paying off loans too fast can actually hurt your credit score.

Micah Smith, a credit repair expert, says this is a real issue. Your credit score comes from a mix of things. Lenders want to see you manage different types of credit over time. Closing accounts, even paid-off ones, can change this mix. It removes a positive payment history from your report.

Imagine you have a car loan. You pay it off early. This closes the account. Your credit report then shows one less open account. It also shows a shorter credit history for that type of loan. This can make your score drop a little bit.

This does not mean you should stay in debt. It simply means understanding how credit works. Building good credit takes time and a mix of open accounts. Knowing this helps you make smart money choices.

Source: Fox Business