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What happens with my credit report after I pay off a car loan?
I just paid off my car loan about a week ago. Will this impact my credit report?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Great job on paying off your
car loan
in full! You no longer have to worry about a monthly payment, so that’s something to get excited about.As far as your credit report goes, you might see a small drop in your credit score after paying off the loan. While this may seem counterintuitive, a slight drop is actually normal. Your credit score can drop for any of the following reasons:
- You technically closed an account by finishing your loan payments
- You don’t have any other installment loans, so ending the loan can affect your credit mix
- You had limited credit history to begin with
You don’t need to worry about this temporary drop. Most scores bounce back to pre-payoff levels within a few months to a year.
In the meantime, you may want to check your credit report regularly to ensure your statement shows your loan paid off and that your credit score hasn’t significantly changed for other reasons.
After you pay off the car loan, you should consider whether you want to keep the coverage level your lender required or reduce your coverage limits.
Jerry
can help you find a new coverage level or switch car insurance providers with just a few swipes and clicks. View full answer
- Gregory R.
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