Paying off loans may not improve credit scores
News from MSN Money:

This post comes from Deanna Templeton at partner site Credit.com.

With credit playing such a huge factor in your financial future, it’s no wonder we look for ways to maximize our credit scores. One common strategy for building your credit scores is to pay off credit card debt. It can give your credit scores a nice boost, especially if you’re carrying a large balance.

It may seem logical, then, to assume that the same strategy must apply to other types of accounts — like a car or home loan, for example. And if you follow this theory, paying a loan off early might sound like a great strategy for building your credit scores.

Unfortunately, you may be making yourself less creditworthy, according to scoring models.

When it comes to credit scores, there’s a big difference between revolving accounts (credit cards) and installment loan accounts (i.e., mortgage, student loan). Paying an installment loan off early won’t earn you any additional credit score points, and keeping them open for the life of the loan…………… continues on MSN Money

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