Why does credit score drop after paying off a loan?
In: Other
It’s because of two things
1. Your average credit age goes down (especially if it’s an old loan)
2. The total amount of available credit you have goes down
If I have two $30,000 loans, and withdraw $20,000 from each, I have $20,000 of available credit (money I haven’t pulled from the loan)
If I pay one loan off entirely, closing the account, I now only have $10,000 of available credit
Latest Answers