Most people think that paying off a personal loan either ahead of time or on time will directly improve their credit score. In reality, the impact could go either way. While the personal loan is ongoing, it improves your score by adding credit mix, showing repayment discipline, and building a longer credit history. The moment you close it-either after the full tenure or through early repayment-the account stops contributing to these ongoing positives. Hence, some borrowers see a small dip after closure, even though they did everything right.

How your repayment history shapes the outcome

The single biggest factor is your repayment track record. If you paid every EMI on time and the loan is marked “closed” with no missed or late payments, then it certainly strengthens your credit file in t

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