Why Your Credit Score Can Drop When You Pay Off a Loan

Episode 56 of The Credit Score Podcast explores a counterintuitive truth: paying off a loan can actually lower your FICO score. Lucas and Luna break down why this happens, focusing on credit mix, account age, and the 'paid-in-full' paradox. They walk through a concrete example: a borrower with a five-year-old auto loan who pays it off and sees a 20-point drop. The episode explains how FICO's algorithm weighs installment loans versus revolving credit, why closing a paid-off account shortens your average account age, and what you can do to minimize the hit. The hosts also discuss the difference between FICO 8 and FICO 9 on this issue, and whether the new FICO 10 model changes anything. No ads, no fluff—just the mechanics of how scoring works. #CreditScore #FICO #CreditReport #PaidInFull #LoanPayoff #CreditMix #AverageAccountAge #FICO8 #FICO9 #FICO10 #AutoLoan #RevolvingCredit #CreditUtilization #Finance #PersonalFinance #FexingoBusiness #BusinessPodcast #TheCreditScorePodcast Keep every episode free: buymeacoffee.com/fexingo