Has your credit score ever dropped after paying off debt?

Has anyone else ever paid off debt only to find that their credit score actually dropped instead of going up?!?! This happened to me recently. I finished paying off $12K of debt at the end of 2020.

I paid off my credit cards in early December, but I’ve kept all the accounts open and have made sure to use each at least once a month. Then on Dec. 30, I paid off the last $800 on my car. My credit score was 778. Then in late February, it dropped to 739.

Admittedly, I knew this was likely to happen. The second Dear Penny letter I ever answered was from someone who paid off their car loan early and then saw their credit score tank by 79 points. https://www.thepennyhoarder.co…-off-car-loan-early/ Sometimes this can happen when you pay off a loan because you reduce your age of credit by closing an old account and your credit mix changes. I also experienced the same thing when I paid off my first car loan, but I had terrible credit at the time and I think the loan was my only credit account.

I think I even said in this community once that I was going to be car loan-free soon and that I didn’t care if my credit score dropped a bit. Gotta admit it: It’s annoyed me a lot more than I thought it would!

Usually, the drop from paying off debt is only temporary. But my score has taken longer to bounce back than I thought it would. I checked it again this morning. It’s at 752, so it’s only recovered 13 of the 39 points it dropped by.

Have any of you community members experienced the same thing? If so, how long did it take your credit score to recover?


Yes, my credit score dropped when I paid off my five-year car loan two months early! I was disappointed at first, but happy to have one less payment to worry about during the pandemic in 2020. My credit score bounced back and increased as I continued to pay off debt over the next year. A drop is only temporary. Focus on the wins!

1 Like

Like you said, only if the account closes when paid and it is an older account. Then it can drop.

It is best to pay off revolving accounts, that stay open with a zero balance than it is a loan that closes the account when paid, especially if that is an old account.

Paying off revolving accounts and new accounts is safer.

1 Like

Mine did when I payed off a couple of old school debts in 2020. I was at 698 and excited about maybe breaking 700 soon…yeah. Now I’m back down to 677 and crawling back up. Id rather be less in debt though, and I have an old inherited disdain for credit scores anyway. I would rather save for ages to pay for something outright, it’s just easier for my life lol.

Hi! Sorry to hear that happened to you. But, it does happen. I did not think by that much. However, when I paid off my student loans, it dipped! I was so upset. All across the board the numbers dropped. As you stated, it is taking a while to jump back to where it was. Hang in there, it will. In the meanwhile, continue to do what you are doing. Good luck!