How will paying off my debt affect my credit report?

Question

I am past due on a $5000 student loan and past due on another $2000 personal loan.......I'm working a great job now and I have a lump sum of money coming in the next two months that will allow me to pay off both of these....My credit score is like 548 now...how will paying these off affect my credit report and will my score raise immediately or does it take a long time to affect it? Any help on this would be greatly appreciated.

Also, yes they have contacted the agencies...and for the longest part I've ignored them which is my own stupid fault, but eh we all make mistakes...I'm all about correcting them now. It's actually odd that when I did finally call the student loan place, they tried to chastise me like I was the worst person in the world.

Answer 1

MYTH #4: Paying off my debts will instantly repair my credit score.
Your credit score is a measure of your past performance, not your current debt load. Paying off your credit cards and settling any outstanding loans will certainly help, but if you have a history of late or missed payments, it won’t undo the damage overnight. Improving your credit score takes time, so after paying down your debts, make an effort to consistently pay your bills on time.

Answer 2

One thing they like to see on your credit report is stability. Paying off an expensive balance all at once may not be your best bet. Spikes in your revolving debt can make you appear erratic...more of a risk. I am not sure if you're paying interest on that student loan yet, and not sure what you're paying in interest on your personal loan. If the personal loan is at high interest you should absolutely pay that off. Regardless, a safe option which will make your credit score look a lot better in the long run is to continue to pay these off. Establish some stability. It reflects well when you pay early, or pay more than what your minimum payment is for that month. It's great that you have this money coming to you and that you're working a good job, but you never know when you might have an emergency. My advice is to pay off half the personal loan (all of it if they're gouging you on interest), get caught up on your student loan, and stick the rest in the bank. If the money is really burning a hole in your pocket, pay a month ahead and then you'll always be a month ahead on at least these two bills. Again, I know it might sound odd to not pay it off right away, but it'll end up making your credit stronger in the future. Another option might be to open up a credit card account and transfer your balances onto it, and then pay that each month. Even with a credit score of 548, you should be able to find a good offer....look for one with 0% financing for as long as you can get it. This will keep you from paying unnecessary interest while letting you pay off your debt over time. Good luck!

Answer 3

Every time you pay off any debt, your credit score goes up. I assume that you will someday want to buy a car or house...right? So the more debts you pay off the higher your credit score will go. A good credit score is about 650 and up depending on what credit reporting agency the score is obtained. Now that you have that money coming, pay off what you owe and you will benefit in the long run. Good Luck!

Answer 4

people that you owe money to and haven't paid for a long time generally have no sense of humor. Since these are old debts, you can pay them off now and you will be finished with them. Your credit score is made of different factors. It looks at your outstanding debt, your payment history, and any derogatory entries.
Pay off the student loan first. Then make payment arrangements on the personal loan. Ask how much they will accept as payments and tell them you want to get it paid off. If it isn't too late, they will generally work with you. Also, if it isn't too late, it could help your credit score.
However, if the loans have been charged off, there is no help. Just pay them off and in the future, be careful with your payments.

Answer 5

This kind of scenario is very tricky. First you should see how many open credit do you have. If that is the only accounts that you have open the best way is just pay so much but try to keep a small balance in the account. because if the credit bureau sees that you closed both accounts or paid it off you do not have an open credit or a credit with a balance. that will lower you credit score even more. this is the best way to raise your credit score, have 3-5 credit open and pay it off the blance on time or at least the minimum on time. that will raise up your credit score. also to maintain a great credit score you must try to keep a low balance on every open credit account that you have and pay it up on time.

Answer 6

I would run your credit report befor you pay off anything.
Some times paying things off lowers you credit score, look at the last reported date on the creditors, if they havent reported it in years your just going to bring that up to a current date, witch is not a good thing. Anything that you do pay off, have the creditors agree befor payment is made that they will in writing to you and all credit agencys that the bill is paid off. This sould be done within 30 days. try to get them all paid off in that 30 days, a short period of time is better than showing that you took 6 or 9 months to pay off.
Good luck with everything.

Answer 7

If you are paying them off that will reflect on your credit score each month. It will not stay there for 7 years. It will only be as long as you are taking to pay them off. I would suggest contacting you creditors and asking them if you can make a payment arrangement with them and if they will lower the interst if they are charging you interest. Tell them flat out you would rather pay them off then file bancruptcy. it is in there best interest to get what money they can. Since you worked for a credit bureau you should know not to take no for an answer speak with a supervisor. once you agree to something they should charge that as a bill instead of your old one and it will reflect on your credit score each month that you pay on time and build your score a whole lot faster.

Answer 8

First off, have you contacted your creditors? The question is have they reported your delinquencies to the credit agencies. If they have, then unfortunately that stays on your credit history for 7 years (that you were delinquent). Sometimes, so long as you are in close contact with your creditors, they will not report you. That is why I asked. Delinquencies negatively affect your score.

Secondly, yes your credit score will improve once you pay off the debt. Any time you pay off a debt in full it is noted on your credit history as "Paid as Agreed" or similar. I do not know the excat amt that your credit score will improve though.

Answer 9

As soon as the money has gone through for both items your credit score will be increased. It takes about a month for this to happen. Good for you for paying off the debt in stead of taking the lump sum and spending it. Most people in this world keep spending even though they're in financial trouble. Kudos to you!

Answer 10

It will definitely help it. Don't forget that the longer you have credit, the better your credit score is going to be and keeping up with any debt and paying on time will help your credit score tremendously as well.