
"It's a Catch-22," says Sarah Davies, senior vice president of analytics, product management and research for VantageScore Solutions, because while it may be good for your personal finances to pay off a loan, it doesn't do much for your credit score.
Indeed, a closed, paid-off account adds to your score, but an open credit account in good standing boosts it more.
That's because an open account shows you're consistently handling credit wisely. A closed account only shows good payment behavior in the past and becomes less and less predictive of future habits.