@Anonymous wrote:While your credit Score may take a hit your credit may or may not. Simply not having a payment may decrease DTI to the point where you could take on more debt. A nominal decrease in score may or may not move you into a different rate bucket. Either the higher score or the increase in cash flow could help or the opposite could hurt. For automatic decisions the score itself may be more important. On something that is being manually reviewed the lack of a debt may be more valuable. Especially in light of the fact that they can see you just paid said loan off.
I would like to take this opportunity to remind everyone that DTI has nothing to do with one's credit. It is not mentioned in, nor does it affect in any way, your credit report.
Agree that DTI has nothing to do with your credit report. DTI will only affect the lender's decision on your risk level and in turn helps determine Cl.
At least that much is true.....
@slund5499 wrote:Agree that DTI has nothing to do with your credit report. DTI will only affect the lender's decision on your risk level and in turn helps determine Cl.
At least that much is true.....
The following is also true:
Your income does not affect your credit report.
Your assets do not affect your credit report.
@HiLine wrote:
@slund5499 wrote:Agree that DTI has nothing to do with your credit report. DTI will only affect the lender's decision on your risk level and in turn helps determine Cl.
At least that much is true.....
The following is also true:
Your income does not affect your credit report.
Your assets do not affect your credit report.
You are absolutely correct it doesn't affect your credit report. But your original post says credit. It certainly affects your credit. Paying off a loan affects your score. It may or may not affect your credit. I can absolutely guarantee that a paid off loan is better for me applying for a product at my credit union where the score is meh important but what is in the file is significantly more important. The fact that I have paid off loans with them and have relatively large assets in the credit union do directly affect my ability to get credit with them. My score (they pull tu) does not show me as being able to qualify for their best car rates. But my assets and my paid off loans mean they have made that very attractive offer to me. Unfortunately I dont need a new car
The title of the post should read paying off your loan will negatively affect your score, not your credit.
Especially since discover is not going to raise my rates when i pay off my personal loan. My credit isnt changed. My score is changed.
"Credit" in this discussion means everything that is supposed to be recorded on your credit reports, and that's why credit reports are named as such. This is different from creditworthiness, which is your ability to handle new credit products and is determined by credit combined with a host of other financial factors. You must be confusing these terms.
Credit is about past and present. Credit worthiness is about future.
@HiLine wrote:
@Roarmeister wrote:You left off a very important word in your title - "Why paying off your loan is bad for your credit SCORE."
It is not bad for your credit. You now have money available to pay off other debts or to save. All those things in turn pay you dividends in you financial future.
So what if your score drops a few points by paying off a debt? Are you defined by your score? Are you worse off financially? Emphatically - NO.
It is bad for your credit. Credit is a wholly different world from financial well-being.
I differentiate between credit and credit score and fiancial well-being. I reject your definition of Credit - credit is your current indebtness to any particular indiviudual or company. How can paying off a loan be a negative to your indebtedness? ANSWER, it is isn't. Your other creditors will not look negatively on you for being responsible financially. It MAY however be temporarily detrimental to your score and theoretically detrimental to you obtaining credit if you are on the bubble. That's why I disagreed with you and continue to disagree. But politely. 
Starting Score: EQ 732 October 2007; Current Score: EQ 839; TU 865, July 2022;
@Roarmeister wrote:I reject your definition of Credit - credit is your current indebtness to any particular indiviudual or company.
Are you saying that if someone has just one credit card and no installment loan and never owes money on his credit card by always paying ahead; in other words, he never owes any money to any particular individual or company, then that person does not have any credit?
@Anonymous-own-fico wrote:
@HiLine wrote:
@Roarmeister wrote:I reject your definition of Credit - credit is your current indebtness to any particular indiviudual or company.
Are you saying that if someone has just one credit card and no installment loan and never owes money on his credit card by always paying ahead; in other words, he never owes any money to any particular individual or company, then that person does not have any credit?
In that case, paying ahead must mean paying for a purchase before that purchase is charged to the card!
Paying for some purchase, for sure 