Does paying off car loan early improve credit score?

+1 vote
asked Feb 25 in Buying & Selling by margretwb2 (240 points)
Does paying off car loan early improve credit score?

1 Answer

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answered Feb 26 by layla (8,180 points)
Paying off a car loan earlier than the loan term can actually put a ding on your credit score.

It seems like paying off your car loan early would be a good idea and improve your credit score but paying off a car loan early actually lowers your credit score by a few points.

This is because it raises your credit utilization ratio and the longer you have the loan out on the car you build up a payment history which actually helps to improve your credit score.

So if possible let the car loan run the full loan term to see a boost in your credit score.

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