If she started in the 700s, she wasn’t going to get a 1000 credit score by the end of the loan.

Of course, assuming she started at 700, and not much lower. But even if she did start at 700 and only went to 800, that's still a net gain of 65 points.

This isn’t cherry picking, its about incentives.

lol. It's one number in a vacuum and you're basing your entire argument on it. Not only is it blatantly cherry picking, but you're assuming everything else in the favor of your position in order to make it as bad as possible.

If I’m carrying a car note and I don’t want to be saddled with debt, I’m forced to take a credit hit because I’m finished paying my loan.

All of that is technically true, but still kind of a shit policy as it consequently raises the cost of borrowing on someone who paid back the full loan plus interest.

You're moving the goal posts now. Before your argument was that paying the loan back in full with interest hurt her, which is almost certainly untrue and what I was addressing, and now you are arguing that she would have been better off going for a new loan in the month before she closed out the loan than the month after. The latter argument I can't really challenge as much but is pretty meaningless.

The credit score becomes a means of penalizing people for failing to carry these burdensome loans uninterrupted.

I know this is BS from personal experience. I've only ever had a small car loan, which I paid off early, and a mortgage. I carried credit card debt one time about 4 years ago when we moved across country and my wife was in between jobs, and that was only for about 3 or 4 months until her pay checks started coming in. And there was a good bit of time between when I paid off my car and got our mortgage and we got a fantastic rate and my credit has comfortable sat about 800 for close to a decade now.

Yes, it's annoying that you have to be using credit to prove that you can currently use credit responsibly. But what other way is there? Are they just supposed to assume you are good with credit because you don't use it? That's like thinking it's safe to believe some stranger you just met on the street because they have never lied to you before.