I have lousy credit. 601 to be exact. If I pay off my debt how will that improve my score?

Question

I have the feeling that when my debt is gone my credit score won't improve. If I'm wrong , how am I wrong ? With no debt, won't my score go up eventually ? and if so , how long from the newest delinquency ?
Thanks!

Answer 1

If you are talking about a debt that is current, in good standing just high utilization - when you pay it down or off it will improve your score when the card company updates the next month.

If you are talking about a debt that has lates on it, then when you pay it down or off you might try a goodwill letter to the card company to remove the lates.

If you are talking about a debt that was charged off, just paying it "will not" improve your credit. It will only show as a paid negative which is just as bad as having an unpaid negative.

If it is with a collection agency and you are either out of the collecting statute of limitations (SOL) or you want to pay it - send a debt validation letter. After you receive validation send a letter requesting that they will remove any negative reporting upon payment.

How long a negative credit card debt stays on your reports is 7 years from the first time you became 30 days late and never brought the account current leading to the charge off.

If you are just dealing with lates, they will remain on your credit for 7 years from the month you became late.

Answer 2

You can raise your credit score by paying your debts regularly, while avoiding delinquencies. Avoid revolving credit (transfering from one credit card to another), and by not applying for new credit cards, loans, etc. Every time you apply your credit takes a hit. I used to have a really high credit score. Then I bought a house and my credit score took a big hit. However, I got what I wanted, so it doesn't bother me any more.

The higher your credit score, the lower interest rates you'll get on future loans.