PriceProtect™
DriveShield™
GarageGuard™
Services
Insurance
Car Insurance
Compare Car Insurance with Jerry
Jerry’s Expert Advice
Car Insurance Estimates
Home & Renters Insurance
Renters Insurance
Repairs
Car Repair Estimates
Repair Estimates for Popular Services
Advice
Read Car Content
Browse Jerry Car Advice
Check Out Expert Car QnA
Learn About How We Create Content
Jerry Data & Research
Does paying off a car loan early hurt your credit?
Can paying off a loan early hurt your credit score? I heard from a friend that paying off a loan can help your credit, but another friend said it hurts your credit. Who is correct?
Phoebe Mah · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Both of your friends are correct—ultimately, it comes down to a person’s financial situation. Paying off a car loan early can hurt your credit temporarily, but it can also help if you have a high debt-to-income ratio.
If you have a thin credit file, having another line of credit, such as a
car loan
, can add value to your credit mix. Having different credit accounts and making consistent loan payments help build your credit history. If you pay off your loan, you’ll see a decrease in your credit score since you’re reducing your credit mix. On the other hand, if you have a high debt-to-income ratio, paying off your car loan could help improve your credit score. By paying off your loan, you’d reduce the amount of debt you have, which will lower your debt-to-income ratio. When you successfully pay off a loan, lenders also consider you a lower risk as you’re less likely to default on a loan in the future.
Before you decide whether to pay off your car loan, consider using a credit score calculator. Some companies or credit services allow you to estimate how making changes to your credit would impact your score.
If you want to save money to pay off your car loan, use the
Jerry
app to save on your car insurance. A licensed broker, the Jerry app does all the hard work of finding cheaper quotes from the top name-brand insurance companies and buying new car insurance. Jerry will even help you cancel your old policy.View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
Join 4M+ members in lowering their car insurance
You Might Also Be Interested
Read Advice From Car Experts At Jerry
What Others Are Asking
Browse More Content
Insurance in Your State
Easiest way to compare and buy car insurance
No long forms
No spam or unwanted phone calls
Quotes from top insurance companies