CCC?

[Williamsfilms]

Ok so I payed back my loan early, why does that reduce my credit rating? I payed it back early? wth? Maybe im a newb, bt im confused by this.

[Jps]

Please, use the search. With as easy parameter as 'loan', you get a lot of threads discussing about this. Here's one for example.

[Sigma]

In all fairness, I don't think that particular question has been answered, and certainly wasn't on that thread.

The reason your credit rating goes down is because you significantly reduced your liquidity by paying off the loan.

For example, if you're a bank, and someone has $200,000 and a $100,000 10y Loan at a low interest rate, that's a lot better than someone who has just $100,000.   On the surface, they look similar, but they're not.  Someone with $200,000 on hand is more able to roll with the punches than someone with just $100,000, even if the person with $200,000 has loan payments to make.  As long as those loan payments are a small enough portion of their total income, the debt is almost a moot point.

Now, if you paid off a loan and still had a huge chunk of cash, or the loan payments were a large portion of your income that you're now avoiding then I'd say it's something worthy of complaint.  There's no doubt the new loan/credit system needs some work to be more realistic, but it's getting there.

[Williamsfilms]

In all fairness, I don't think that particular question has been answered, and certainly wasn't on that thread.

The reason your credit rating goes down is because you significantly reduced your liquidity by paying off the loan.

For example, if you're a bank, and someone has $200,000 and a $100,000 10y Loan at a low interest rate, that's a lot better than someone who has just $100,000.   On the surface, they look similar, but they're not.  Someone with $200,000 on hand is more able to roll with the punches than someone with just $100,000, even if the person with $200,000 has loan payments to make.  As long as those loan payments are a small enough portion of their total income, the debt is almost a moot point.

Now, if you paid off a loan and still had a huge chunk of cash, or the loan payments were a large portion of your income that you're now avoiding then I'd say it's something worthy of complaint.  There's no doubt the new loan/credit system needs some work to be more realistic, but it's getting there.

Thank you! That was allot of help! haha this will take some getting used to.