Credit score dropped 40 points after paying off my car loan early

3 comments

3 Comments

Did you check your credit utilization ratio right after? Paying off a loan early can mess with your credit mix and average account age, so your score dips temporarily. When I paid off my car early, mine dropped about 35 points too, but it bounced back within 3 months. I just kept using my credit card normally and paying it off each month. The hard part is waiting it out, but your score should recover if everything else stays stable.

diana51223d ago

Hmm actually I think that's more about the credit mix and average age of accounts rather than utilization ratio. Utilization is about how much of your available credit you're using, which usually drops when you pay off a loan since your total available credit goes down too. But yeah the dip is normal, it just takes patience.

spencer98123d ago

Used to think utilization was the main factor in credit scoring, but your breakdown makes a lot of sense. The way paying off a loan shifts the average age of accounts really explains that temporary dip. Good to know the recovery happens pretty fast if you keep things steady.