New Delhi, Aug. 5 -- Paying off a loan before its tenure ends often feels like the right financial decision. It reduces the overall interest burden, frees up monthly cash flow and helps borrowers become debt-free sooner.

But does repaying a loan early automatically improve your credit score?

The answer is not as straightforward as a simple yes or no. While early repayment reflects financial discipline and responsible borrowing, it does not necessarily result in an immediate improvement in your credit score.

This is because credit scores are calculated using multiple factors, including your repayment history, credit utilisation ratio, credit mix, outstanding debt and the length of your credit history. In other words, your creditworthine...