Does paying off an installment loan like a car or personal loan help or hurt my credit?
It's usually a small, temporary negative followed by a long-term positive. When you pay off an installment loan, you may see a minor score dip because you lose an active account and possibly reduce your credit mix, especially if it was your only installment loan. But that dip is minor and fades, and you're rid of the payment and interest, which is what matters financially. Unlike revolving credit card utilization, installment balances have a much smaller direct effect on your score. Never keep a loan just to protect your score; the interest costs far outweigh a few points. If you want to preserve credit mix, you'll naturally rebuild it with future borrowing. Don't let tail-wagging-the-dog thinking keep you in debt.
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