Credit scores reward a track record of actively managing different types of credit over time. Paying off an installment loan closes that account, which can reduce your "credit mix" and shorten your average account age if it was one of your oldest lines of credit. It can also temporarily lower your total available credit if it was a large loan, nudging your utilization ratio in the wrong direction. The dip is usually small and short-lived, and paying off debt is still almost always the right financial move — the score effect is a side note, not a reason to avoid it.