How Long Does it Take For a Paid Off Loan to Show Up On Your Credit Report?

If you’ve recently paid off a loan, you might be wondering, how long does it take for your paid off loan to show up as paid off on your credit report. We will explain the answer to this question in much detail below.

How Long Does it Take For a Paid Off Loan to Show Up On Your Credit Report?

It could take anywhere from 30 to 45 days from the date you paid off your loan for it to appear as paid off on your credit report. Typically, when you pay off a loan, your lender will report the loan as paid off at the end of your account’s billing cycle. So, the exact amount of time is different from one person to another, depending on when your lender reports the account status to the credit reporting bureaus.

So, even if your loan appears as paid off on your online portal, it takes a while for your lender to update the account status at the credit reporting bureaus. To see if your loan appears as paid off, you should periodically check your credit report. Once your account appears as paid off on your credit report, your credit score will be updated to reflect the paid-off loan.

How Long Will a Paid Off Loan Appear On My Credit Report For?

A paid-off loan where you’ve never missed a payment on the loan will appear on your credit report for 10 years from the date that you paid off the loan. After the 10 year period, the loan will automatically be removed from your credit report. So long as the loan appears on your credit report, it will continue to boost your credit score and serve as proof for lenders as to how you’ve handled credit in the past.

That said, a paid off loan where late payments were reported will appear on your credit report for 7 years from the date you missed your first payment on the loan. After the 7 year period, the loan will automatically be removed from your credit report.

People often mistakenly believe that paying off a loan removes it from their credit report, but even paid off loans cannot be removed from your credit report unless there is an error in the information being reported on your credit report.

If there is an error in the information reported, you can file a dispute to have the wrong information removed. The dispute process takes 30 days to complete. During the 30 day period, the credit bureau you file a dispute with will conduct an investigation to determine whether the information on your credit report is accurate.

If there is indeed an error in the information, the negative item will be removed. However, if there is no error, the item will remain on your credit report.

Does Paying Off Your Loan Affect Your Credit Score?

People often believe that paying off a loan will improve their credit score, but the reality is that oftentimes, paying off a loan can result in a small and temporary drop in your credit score.

A small drop in your credit score may occur because you’re essentially closing an installment account, which can reduce your credit mix, especially if the loan you paid off is your only installment account.

This is so because closing an installment account reduces the diversity of the active accounts on your credit report, which causes the credit mix factor to lower your credit score. Your credit mix accounts for 10% of your credit mix, and the more diverse the accounts you’re currently handling, the better this factor will affect your credit score.

That said, the drop in your credit score is likely to be temporary and your credit score should recover within a a few months so long as nothing negative is on your credit report.

This applies regardless of the type of loan you’ve paid off, such as an auto loan, home loan, personal loan, etc. Paying off any type of loan usually results in a slight and temporary drop in your credit score for the reasons we provided above.

Did Your Credit Score Drop After Paying Off Your Loan?

If your credit score dropped after paying off your loan, don’t worry too much as this is completely normal and occurs frequently. When you pay off a loan, you’re closing an installment account. Whenever you close an installment account, your credit score drops a few points. Experts believe that such a drop occurs because closing an installment account potentially reduces your credit mix (diversity of accounts you’re currently handling), reducing your credit score. So, don’t worry too much about a small point drop as chances are that your credit score will recover within two to three months of paying off your loan.

The Bottom Line

The bottom line is that its takes approximately 30 to 45 days for a paid off loan to appear on your credit report as paid off. This time it takes may be different from one lender to another depending on when they report your account status to the credit reporting bureaus. If you have any general questions or comments, please feel free to leave them in the comments section below.