While this is all technically correct it’s still dogshit that your score goes down when you do the thing you are supposed to do with a loan.
Your options are:
Take out a loan and pay it off: score goes down
Take out a loan and don’t pay it off/default: score goes down
Remember that your credit score doesn’t exist for you. It’s not for your benefit. It’s for the benefit of lenders, and they don’t give a damn how unfair the system is.
This is what people are missing. Credit score is a completely valid metric, but it’s just a measure of how likely lenders are to make money off of you.
What I don’t get is: since she paid off her car loan, she’d have more disposal income now…? Shouldn’t that increase her credit score?
Seriously. “I rarely take on debt, regularly save aggressively, and pay off my debts as quickly as is convenient” means I’m bad to loan to in their eyes when if you had evidence of all that as an ordinary person I’m exactly who you’d want to loan money to.
That’s how I’ve tried to be (and currently have no debt!).
When I needed to buy a car a few years ago, they gave me a terrible rate because I had a bad score. I had paid off a couple of personal loans AND all my student loans…but it’d been a few years so my credit score had dropped. So fuck me for not borrowing money every day.
I ended up doing a co-sign for a better rate. And guess what? I paid off that car loan a couple years early and got dinged on my credit just like the original post.
But I know they don’t care about any of that and are actually mad I didn’t pay the minimum for the entirety of the loan.
Your second option is 2 options. You dont need to default, just never finish paying it off.
Maybe you could just keep refinancing over and over until you’re making 0.01 payments a month on 100 loans. And have a max credit score.
The terms of a loan boil down to “we’ll give you x, pay it back plus interest in y amount of time”. How do you stretch something with a legally binding predetermined end out indefinitely without hurting your score or financial wellbeing?