Why did my credit score drop after paying off a car loan early?

[CdnDogWoodFunTrey]

I'm confused and upset. I had two car loans. I paid off one of them three years early by paying $800 a month instead of the original $299 a month. I also paid off a $5,000 credit card balance on one card and a $2,000 balance on another. I didn't close either card, so both are open with zero balances. I finally feel like there's light at the end of the tunnel. But Equifax says my credit dropped 27 points due to a reduction in open accounts. That must be from paying off one car loan. I thought that would boost my credit because ym debt-to-income ratio was working against me. What figures?

 

[Cluckinator89]

Credit scores are typically a scam. They reward you for being in debt. Getting out of debt is the goal.

 

[Maria43]

It will recover.

A small dip is normal when an account closes.

As your TDSR goes down, your score should rise in a month or two.

 

[DeepSakuraMilo]

First off congrats on all the hard work and getting everything paid down! The best thing you can d is leave those credit accounts open. Just don’t use them, or use them for bills and points/miles, and pay off the full balance every month. That keeps your debt to credit ratio nice and low, which boosts your score. Paying bills on time makes up about 40% of your rating, and your debt ratio is roughly another 30%. Hard inquiries count for about 5%, and the rest comes from how long your accounts have been open.