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Posted in Auto Loans
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Skutala

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Does Paying off the loan would decrease credit score? And Why?
I want to payoff my loan, But fearing of losing the credit score as account get closed.

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If you haven't read the articles here, please do so you can learn how credit works. Paying off the loan could cause a bit of a dip in credit score because of that account being closed, but it is foolish to be so focused on a number that can fluctuate just because of a change in the weather and focus on having a sound history. 

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Paying off a loan  Benefit: No Payments   Benefit Saving interest=Saving Money  Benefit- One less payment to make/remember.   Benefit: Overall debt is reduced.  The downside, yes, you get a credit score reduction because the account is no longer active.   I'd take that downside every time.  While you score may be reduced, you have a paid off account in your profile and all the other factors would look good.  Proven track record always looks good to a creditor.

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Depending on who you borrow from, the score isn't always a factor. If you already have enough credit cards and you have a decent car loan, anything else that you need or want will be HABIT based rather than SCORE based. So it's better to have lower score with a paid-off loan on your report than to have a high score with open loans if you had intended on buying a house or taking out a loan for a major purpose.

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