The moment my credit score dropped 40 points for paying off a loan

I always thought paying off debt early was a no brainer. So I paid off my car loan in full back in March, 2 years ahead of schedule. Next thing I know my credit score drops from 780 to 740. My buddy who works at a credit union explained that closing the oldest installment account hurt my credit mix and average account age. Now I'm torn between keeping small balances for credit health versus being completely debt free. Which side do you all lean towards when it comes to this tradeoff?

2 comments

2 Comments

riverm4828d agoMost Upvoted

Man I feel this so hard it hurts. Like you finally do the responsible adult thing and the system just slaps you in the face for it. My buddy paid off his student loans early and his credit dropped like yours did, and now he just keeps a tiny balance on one credit card and pays it off after the statement hits. I mean it's basically paying a stupid tax just to play the game, but at least his score stays above 760 now. Maybe it's just me but I think the whole system is designed to keep us in debt forever, you know?

ryanj6028d ago

My 740 is still way better than my buddy's score who just keeps a $2 balance on a card he never uses just to "show credit utilization" or whatever. Feels like the whole thing is just a game where the house always wins.