Why Your Credit Score Drops After You Pay Off a Car Loan

In this episode, Lucas and Luna explain why paying off a car loan can actually lower your FICO score by 20 to 40 points. They break down the two main reasons: the closure of an installment loan reduces your credit mix, and the drop in average account age. Using a real example of a listener named Sarah who paid off her Honda Civic loan in April, they walk through how the FICO algorithm reacts, and share three steps to minimize the hit: keeping the account open, maintaining other installment debt like a mortgage, and timing a new credit application. They also discuss how the effect fades within three to six months as the closed account ages. No scare tactics—just a clear explanation of a counterintuitive credit score phenomenon. #CreditScore #FICO #CarLoanPayoff #CreditMix #AverageAccountAge #InstallmentLoan #FICOAlgorithm #CreditReporting #Finance #PersonalFinance #CreditEducation #CreditTip #CreditHistory #BorrowerHealth #CreditScorePodcast #Fexingo #BusinessPodcast #FexingoBusiness Keep every episode free: buymeacoffee.com/fexingo