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Why Are Loans I Paid Off Still on My Credit Report?

Paid-off accounts are part of your credit history and can stay on your credit report for up to 10 years.
Aug. 30, 2018
Credit Score, Personal Finance
Why Are Accounts That Have Been Paid Off Still on My Credit Report?
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Paying off a loan feels great. But being finished with a loan doesn’t mean the loan is done with you. It could be on your credit report for years.

That’s great news if you paid on time. But if you didn’t, your credit missteps can linger long after that loan is off the books.

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Why do paid-off loans stay on your credit report?

It’s a common misconception that your credit report includes only information about your active accounts. Unless you have a very limited credit history, your credit report is probably full of data about closed accounts, like loans and credit cards you paid off years ago.

Your credit reports list both positive and negative information about how you manage credit.

Your credit report is a detailed document that lists information about your history with handling borrowed money. Each of the three major credit bureaus keeps its own file about your credit accounts, as reported by creditors.

That data is used to calculate your credit scores, which are then used to make lending decisions.

In addition to personal information, like your name and address, your reports list both positive and negative information about how you manage credit. (The reports can look daunting; here’s our guide to how to read them.) For example, if you always pay your auto loan on time, it will be listed as an account in good standing. On the other hand, if you’ve defaulted on a credit card, this will be noted, too.

How long will the paid-off account be on my report?

How long the loan will stay on your credit report depends on how you handled the payments.

If you paid as agreed month after month until the loan’s paid off, it will remain on your credit report for up to 10 years from the time it was closed.

If you paid as agreed month after month until the loan’s paid off, it will remain on your credit report for up to 10 years from the time it was closed.

If you defaulted, that information will stay on your credit report for as long as seven years. The same goes for delinquencies, foreclosures, short sales and most other negative information.

The only derogatory mark that can stick around longer is a Chapter 7 bankruptcy, which will remain on your credit report for up to 10 years.

Assuming that the loan you’ve recently repaid was in good standing, it’s actually a good thing that it didn’t drop off your credit report as soon as you made your final payment. You’ll continue to get “credit” for it for years to come.

How long will a paid-off loan take to show up on your report?

It can take one or two billing cycles for a loan to appear as paid off. That’s because lenders typically report monthly. Once it has been reported, it can be reflected in your credit score.

You can check your free credit report on NerdWallet to see when the loan is reported as paid.

Will my credit score change if I pay off my loan?

You shouldn’t count on your credit score going up because you finished paying off a loan. You will have one fewer current accounts on your credit report, and paying off a loan might cause a small dip in your score. That isn’t a reason to not to pay it off.

Paying off a loan might cause a small dip in your score.

Your overall finances should be your top consideration. Something called “credit mix” — whether you have both traditional loans and credit cards — is a factor in your credit score. If your loan was your only installment debt, for example, you could see a small drop. But remember, the record stays on your credit report even after the loan is paid.