Why does your credit score drop when you pay off debt?

Home Forums Credit Reports & Scores Why does your credit score drop when you pay off debt?

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    StellarFi
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    #11989
    Team StellarFi
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    If you pay off your credit card, your credit score will increase because you made an on-time payment (it makes up 35% of your FICO® score) and your credit utilization will increase (30%). With credit card debt, your credit score drops if you close off the account without paying off your credit card balances because your credit utilization increases.

    But, if you pay off any other debt, like a car loan, mortgage, or student loan, your score drops because it closes the credit account. This affects the length of your credit history and your credit mix. Closing an older account may affect your score more.

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