Why does credit score drop after paying off a loan?
In: Other
People in the comments making a crucial mistake
Your credit score is not how likely you are to pay off a loan
Your credit score is how appealing you are to loan companies as a customer
The best person to give a loan to is someone who takes out too much credit from multiple sources and can make the minimum payments forever
That’s why the most valuable variables in your credit score are how long you’ve had lines of credit open continuously the amount of lines of credit you have open and never missing a payment.
If you take out one small loan and pay it off right away, why would I lend you any money? I’m better off just investing that money in a money market fund or risking it in the stock market.
Loaning money to you is only better if you stay in debt for a long period of time
Your credit score is a reflection of how good of an investment giving you money is. Not how responsible you are with that money.
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