Question


CURIOUS...

Will paying off your debts at once ruin your credit?

Yesterday, my credit score was 532 and I was up to my neck in high interest credit card debt and student loans. Today I received a cash gift of $7,000 from a better off relative who decided to help me. I thanked her and I knew that this was a once in a lifetime opportunity to wipe my slate clean and have a fresh start. I chose to pay off all my debts today, I am tired of the annoying calls, collection agencies, and high interest rates. I am tired of being a slave to my creditors. I had enough. Today I made the bold move and paid everything off at once. But I wonder if fully paying off all of my debts, credit balances, and obligations will restore my credit back to "good" status. What will it do? What can I expect to happen? What will happen? Please help me, I am very anxious to know what I can expect. Thanks and I will give points to everyone who shares their wisdom.

3 weeks ago - 6 answers

Best Answer

Chosen by Asker

Paying off your debts does not hurt your credit. NOT paying on time is what ruins your credit. However, paying everything off may not give you a huge increase either. About a third of your score is based on the ratio of credit card debt to limit. Carrying balances of more than 30% hurts your score. Pay off the balance, and your score will rebound. So you will probably have some improvement to your score. The best way to actually build a good score is to use a credit card for small purchases and pay it in full every month. You need at least 24 months of consistent, on time payments to improve your score.

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by bdancer222

3 weeks ago

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Other Answers

i dont think it ruins your credit. You build your credit by making payments so if you send in one check and pay it off you dont have that credit history of having good payments on something you know? so i would suggest putting the money in a savings account and pay it off monthly

by laugh_wid_mee- 3 weeks ago

How could paying things hurt your credit? I mean, really. Only time will "restore" your credit.

by Common Sense- 3 weeks ago

No, it will not ruin your credit. But it will not cause it to "spike up" either.

by jlf- 3 weeks ago

No it will not ruin your credit, however you should know that if you do not use your credit you will loose it. You need to have open lines of credit, making prompt payments, in order to rebuild a good credit rating. If you want to rebuild your credit then: 1) If the credit card accounts are still open use them, however remember how you felt today about being fed up and use them wisely. Charge small amounts each month (no more than you can afford to pay off with cash in the bank) and pay them off in full. With every prompt payment your credit score will rise a small amount. 2) If the cards are the collection accounts you referred to, then go to your bank or credit union, see if they have a secured credit card. Open an account with $200-$500 and get the card. Again charge small amounts and pay it off in full. After a year see if they can convert the card to a unsecured card.

by Dixie Darlin'- 3 weeks ago

it will reduce your debt to credit ratio helping it

by chunkymonkey153- 3 weeks ago