Question

Does paying off all debt increase credit score?

Answer 1

Paying off your debt including all your debt is a good thing especially if you can afford to pay off the debt.

It's great to be debt free too so that's one of the benefits of paying off all your debt.

But if you have debt that has gone to collections then paying off that debt doesn't always increase or improve your credit score.

That is unless you contact the debt collector and get them to agree in writing that they will report your debt as paid to the credit bureaus.

Some debt collection agencies do not report your debt as paid so paying off collections doesn't always improve your credit score.

But if you have debt that has not been sent to collections then paying them off will help your credit score but it will not improve your credit score a lot.

Keeping loans and other credit accounts open long term and paying the monthly payments shows a credit history and payment history which is better for your credit score than just paying them off.

Keeping the debt open and paying monthly on time helps to improve the credit score overtime so it's best to pay monthly on the debt and show you have a good payment history.

But paying off the debt you have is not a bad thing entirely but you'll have a better credit score overtime by paying the monthly payments on time.

Answer 2

Paying off all debt can increase your credit score but it's not always the case.

If you're close to maxing out your credit cards, your credit score could jump 10 points or more when you pay off credit card balances completely.

If you haven't used most of your available credit, you might only gain a few points when you pay off credit card debt.

Yes, even if you pay off the cards entirely.

If you take out a loan to consolidate debt, you could see a temporary drop because of the hard inquiry for the new loan.

Your credit score can take 30 to 60 days to improve after paying off revolving debt.

Your score could also drop because of changes to your credit mix and the age of accounts you leave open.

Consistently paying off your credit card on time every month is one step toward improving your credit scores.

However, credit scores are calculated at different times, so if your score is calculated on a day you have a high balance, this could affect your score even if you pay off the balance in full the next day.