Here’s What You Should Know About Credit Score & Paying Off A Debt Early
CREDIT SCORE – Are you wondering if paying off a loan early can really hurt your record more than the good it can bring?
More and more people are getting concerned about “credit scores”. It refers to the forecast on how likely you can pay off a loan or debt on a given a time. It also represents your credit risk and it can be greatly based on your credit history.
Are you wondering if you are building your credit score or you are pulling it down? There are actually countless factors that can impact your CS on different ways. Anything that you do with one of your bank cash loans or any type of debt can have an impact on your CS.
There are a lot of things that can help you build your credit score. Here are some of what we can call “boosters” when it comes to credit scores:
- a long credit history
- handling multiple credits at the same time
- you always make your payments on time
- your accounts bears a good mix of different types of accounts
However, on the other side of what we can call “boosters” in building credit scores, you might be one of the many people who are confused if paying off a loan or debt early can do more bad than good in your credit score?
Based on an article on U.S. News, paying off a loan early can result to a drop on credit scores but it bears a temporary effect. After a while, it will be best to check as there might be other factors that affects your credit scores such as missed payments, higher credit utilization rate on credit cards, recent credit inquiries, etc.
However, there is an enough reason to pause before paying off your loan in case you plan to borrow again soon. It can pull your debt-to-income ratio and may have temporary impact on your credit score. In case you have the plan, it is best to hold things from paying off a debt early.
Meanwhile, on a bright note, a lot of financial planners believe that paying off a loan early only shows the person’s capacity for loans and other types of debts. Most importantly, there is surely no negative effect on your credit score that can outweigh the peace of mind of having paid a debt.