Closing Your Oldest Loan Can Lower Your Credit Score

Paying off a loan or closing a credit card is treated, reasonably, as a straightforwardly good financial move. For the credit score specifically, closing the oldest active account on file works against two of its own inputs at once: the age of the oldest account, and the average age across all accounts.

Both numbers matter to how a score is built, because they signal long-run repayment discipline rather than a single account’s recent behaviour. Close the oldest one, and both drop the moment it’s closed. An illustrative example: a borrower holding a 7-year-old loan and a 2-year-old card has an average account age of roughly 4.5 years. Close the 7-year-old account, and the average falls to 2 years - instantly, regardless of how well either account was ever repaid.

The Payment History Survives; the Age Does Not

The record doesn’t vanish outright - a closed account’s payment history stays on the credit report for up to seven years, so the years of on-time payments it built continue to count in the borrower’s favour for a while. What’s lost immediately is the age itself, which is a distinct input from the payment record and doesn’t get a grace period once the account is closed.

Pay It Off Anyway - Just Choose Which One

Paying off debt is still almost always worth doing regardless - the interest saved and the balance-sheet improvement from closing a loan usually outweigh a temporary score dip by a wide margin. The point is just not to be surprised by the dip, and, where there’s a genuine choice about which of several accounts to close, to weigh which one is actually the oldest before deciding.

Where there is a genuine choice between accounts, check which is oldest before closing. The interest saved usually outweighs the dip by a wide margin - the point is to pick the account deliberately rather than be surprised by which input moved.