Why did my credit score drop 40 points after paying off debt?

Home (Live) Forums Credit Reports & Scores Why did my credit score drop 40 points after paying off debt?

Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • #9959
    StellarFi
    Keymaster
    #9965
    Team StellarFi
    Moderator

    Paying off any debt reduces your credit score by a few points because it affects the average age of your credit account. The effect is more if it is an older account.

    Once your debt is paid, the account is closed, which also affects your credit mix. In addition, if it is a credit card account, your credit utilization rate increases, which further adds to the drop in your score. However, this is temporary. It is always a good thing to close off debts because it reflects well on your credit behavior. Lenders may see the successful payment of a loan as a positive sign and responsible credit behavior.

Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.

StellarFinance, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Build credit with every bill you pay.

With StellarFi, your bills are paid on time and reported to TransUnion®, Experian®, and Equifax®.

Credit score increase based on StellarFi member data. Credit score increase not guaranteed. On-time payment history can have a positive impact on your credit score. Nonpayment may negatively impact your credit score.

Get Free Credit Score 2

Related questions

Home (Live) Forums Credit Reports & Scores Credit Reports & Scores

Viewing 15 topics - 1 through 15 (of 223 total)
Viewing 15 topics - 1 through 15 (of 223 total)
  • You must be logged in to create new topics.