How many points will my credit score increase when I pay off certain outstanding debts?

Question

I would like to find out how many points each debt on a credit report is worth. For instance, if I pay off my student loans, how many points will my credit score increase per loan? Does it increase over time or once you pay off each debt?

Answer 1

Each account has a different affect on your FICO credit score. You'll get the most FICO points for your extra dollars by paying down any revolving (non-installment) account that has a balance that is more than 30% of its credit limit. If the account is in good standing, improvement occurs over time, long before the entire balance is paid off. If the account is delinquent, score improvement happens as you pay it off, but it is much slower, and your score will jump when the paid-off, closed delinquent account falls off your credit history in 7 or more years.

30% of your score is credit utilization: how much of your credit limit is used up by your balance? You need to keep your balance below 30% of your credit limit, or you will hurt your FICO score. For example, if you have an $800 credit limit, you must not have a balance higher than $240, which is 30% of $800. Don't close a revolving account just because it is paid off: Those old paid off accounts will have a zero balance on them, and you can't get any better than 0% utilization. They also look at total utilization: they total up all your balances, and all your credit limits. That total percentage utilization must be kept below 30% of total credit limits, or you'll hurt your FICO score. Close those old paid off accounts, and you'll take away $0 in total balance, but you'll take away all those dollars in credit limits, and up goes your total utilization, down goes your score.

You can score points by disputing incorrect, negative information on your credit reports. First, go to http://www.annualcreditreport.com and get your free annual credit reports from each of the 3 Credit Reporting Agencies. Inspect them for incorrect information (merging of accounts with similarly named people, input errors, identity theft) and begin disputing the bad info. If the negative info is verified as true, it must stay on your reports for at least 7 years from the time of first delinquency. If it cannot be verified, the credit reporting agencies (CRAs) must delete it in 30 days, and your score will rise.

It is a myth that you need to carry a balance - and thus pay finance charges - to improve your score at the fastest rate. 35% of your score is for payment history. You can score max FICO points by making a small, NECESSARY purchase once a month on each card and paying the card off in full every month, always on time. You want to show a potential mortgage lender that you don't need credit for anything except a mortgage loan. Continue changing your lifestyle so that you don't need to carry balances.

For installment loans, like auto and student loans, just pay them on time, and you'll score points for making many on-time payments in a row, and for bringing your current balance farther below the original loan balance. You can make extra payments to pay off the loan early if you want to save extra interest.

In rare cases, particularly with an installment loan that has been open at least several years, you will lose some FICO points when you completely pay it off and thus close the account. You might also lose some points when the closed, paid off installment account falls off your credit reports in 7 more years after it closes. This is no reason to worry, just plan your new credit application, say, a mortgage, to occur about 6 months before your installment loan payments are scheduled to end.

You can get a free copy of your credit report from each of the 3 major credit reporting agencies (CRAs), once per year, at www.annualcreditreport.com. Look at your TransUnion credit report. It reports up to 48 consecutive months of activity, month-by-month, in a little box. Your goal is to produce a string of 48 consecutive boxes having OK in them, on every account, no finance charges. That will be a beautiful sight to a mortgage lender.

If you pay off a card, leave it open. 15% of your FICO score is for length of credit history. The average credit user has an oldest open account that has been open for 14 years. They also score you on the average length of time all your open accounts have been open.

You cannot improve your score by closing credit card accounts; you can only hurt your score. Just don't pay money to keep the account open (i.e., an annual fee).

Please vote: Did this help?

Answer 2

If these are current active accounts, paying off the balances will give your score a quick boost. Carrying balances of more than 30% of your available limit hurts your score. But even more, you will save a small fortune in interest!! $75K in credit card debt is ridiculous. Credit cards are short term convenience, not long term financing.

Answer 3

Well, I'm not sure about that. Any paid off debt looks good for you if the payments are on time. It's the revolving charge accounts that can really raise or lower your score, depending on what is owed, if they are close to the credit limit, or if you keep them low. At least that's what my credit report says.

Answer 4

FICO scoring is entirely proprietary information. The bureaus will not share with the public how the scores are figured.
Your scores will eventually rise as you pay off debts...IF they are open/current debts. If they are collections or charge-offs, you credit score will not change because of a pay-off. Credit bureaus do not reward consumers for paying off delinquent debts.

Answer 5

Without seeing your ENTIRE credit report, not even FICO can give an accurate answer to this question. There are to many interrelated factors.

Answer 6

How many points will my credit score increase when I pay off certain outstanding debts?

T.R.Y
T.H.I.S.
S.I.T.E
W.H.E.R.E
Y.O.U
C.A.N
F.I.N.D
T.H.E
B.E.S.T
S.O.L.U.T.I.O.N
F.O.R
Y.O.U

Answer 7

It's bad

Answer 8

Never really thought about this