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this post was submitted on 20 Aug 2023
703 points (96.8% liked)
Asklemmy
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Was coming here specifically to say credit scores. Oh what’s that you paid off your student loans? Here have a big credit hit as a treat. Oh you’re using your credit? Here have a credit hit even tho you’ve never missed a payment. How dare you use the credit you have??
Why would paying off your student loans give you a credit hit?
Edit: lol who is downvoting this I legitimately didn't know the answer
It decreases your overall available credit
Loans are different from lines of credit... loans don't have an "available credit" associated with them. The reason your score might go down when you pay off student loan is because you're reducing the number of open accounts you have, and also possibly reducing the diversity of accounts (lines of credit vs. installment loans).
Disclaimer: I'm not saying this is a good system, just explaining how it works.