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Posted in Auto Loans
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Question By
hrigsbyrn

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Why would paying off a car loan early lower my score?
I recently paid off an $8000 car loan extremely early after never missing a payment and having paid on time for 2 years. Why is my credit score now lowered? I would have thought it would have given it a significant boost.

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Because you closed an account. Just about everytime you close an account it will cause a decline in credit scores. Average age of accounts can be affected, mix of credit accounts can be affected, overall credit utilization can be affected. I understand that it makes no sense, you would think that if you pay an account off it should show that you are a responsible individual. I guess one of the requirements to have good credit in this country is to be in debt to many lenders, not too much debt though, just a little bit of debt. It is best to pay down a loan but not completely off.

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