Will Paying Off Debt Instantly Improve My Credit?

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Unhappy with your current credit score? Or maybe it’s your preferred lender that doesn’t think it’s all that hot. Either way you’re probably hoping to improve it and improve it fast.

If you’re like most folks that means paying off some debt.

Many folks with a less than stellar credit scores suffer from too much debt, resulting in poor payment history or high credit utilization. However, simply paying off any old debt might not boost your credit score. And in all cases it will take a little time for your credit score to adjust.

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Here are few things to consider when you’re picking what debt to pay off first.

Paying off outstanding debt is always good

Paying your bills on time is the best way improve and maintain good credit. That’s why your first priority is always pay utility bills, credit cards, auto loans, mortgages, or other monthly bills on time, every time.

If you have a little extra cash, it doesn’t hurt to pay a little extra. Your ultimate goal might even be to pay some debt off completely.

Paying off the right outstanding debt can boost the affect

Assuming you do have a little extra cash, the next question is what debt do I pay first? Believe it or not, as it relates to your credit score, they’re not all equal.

Without going into all the complexity of credit scoring, your goal is to pay-down debt that will give you credit for multiple credit scoring factors. Credit card debt is often the best target to get fast results.

Paying down credit card debt is typically rewarded more because you are paying down riskier (unsecured) debt and lowering your credit utilization. Pay a whole credit card off or at least get it under 10% and you will really see some impact.

Paying off certain overdue or charged-off debt can hurt

Now for the dangerous stuff…

We certainly encourage you to pay back all of your debts, but some categories of delinquent debt can hit you with a credit score whammy!

Paying off a credit account that’s overdue and shows an outstanding debt is going to help your credit score. However, paying off an account that is in collections or charged-off is most likely going to lower your credit score. The reason for this is that it is going to reset the recency of that bad debt account. This will make your debt problems and poor payment history look like a recent trend–scary to any creditor.

At the end of the day, getting your debt under control can have the biggest impact on your long-term credit health. So make a plan and attack the right debt first.

  • keith

    One important thing to consider is if you can pay off a collection account and in the process have the company with the collection on file delete it off your credit report (its called “pay for delete”) and in this case you will also be able to improve your score vastly.

    • Tangie

      I agree with that as well, that was exactly what was running through my mind.

  • Grannybooker311

    what about hospital bills

  • Grannybooker311

    i just got a reposession on my criedit report but it saying paid and closed

  • Gohomewithher

    so, is it to say that if have past-due medical bills that are due to “roll-off” soon (due to the 7 year model) that it’s best just to let them roll-off rather than pay them?  which is worse for my credit score-paying, or roll-off?

    • Tangie

      You can let them roll off, but you have to remember they can come back, if the company locates you they can start collection process again on those past due bills. It’s best to set up a payment arrangement, try to pay what you can and then have them delete it once you have paid it in full, just remember to get the pay for delete in writing.

      • guest

         It is far better to let them roll off.  If you start paying anything it will start the collection process all over again.  There is a certain amount of time a company is allowed to collect and it’s far less than seven years in most states. That’s not saying it goes off your credit report in less than seven years, but legally they can no longer come after you.  In my state for instance it’s four years.  Do NOT pay a cent or it will re-open that whole account.

      • Acushle

        What about Virginia ? For how many years, they are allowed to collect ? When would the deb history be erased in my credit report ?

      • russell

        i thought they only had 7 years to post on credit report.What do you mean by “they can start over again if they locate you”.I aways thought 7 years from time of service.

  • Osjan201970

    what is a closed account considered? if paying off a closed account is that good or can it hurt? i have been working at paying of my debt and my boyfriends debt, mostly what i am noticing is closed accounts. i really dont understand the closed accounts thing at all, if anyone can explain please do. does closed account mean that account is closed but is still owed? or does it mean everything about it is closed?

    • Tangie

      A closed account is closed, but you still owe on it, you still have to pay it, it is still your debt, unless you file for bankruptcy which can help with some accounts, If you do pay off a closed account, make sure you pay for delete by asking the company so it doesn’t start over again.

  • Aliciaj1

    Is it better to pay the credit collection company, or should you just pay the person you owe.  How do you get them to understand when you say this is my work number you can’t call here?

  • Jo

    I have 2 credit cards that I want to pay off but I’m not sure which one to pay off first. One is about $3K and has a high interest rate; the other is $1500 at a MUCH lower interest rate. I was thinking of paying $250/month to the one with higher interest but would it be better in the long run to pay off the one with the lower balance?

    • Clayton300

      No.  When deciding between to of the same types of debt, pay the one with the higher interest rate first.

      • Clayton300

         *two of the same types of debt

      • Jo

        Thank you! :)

  • Acushle

    What is the statue of limitation period for collecting credit card debt in Virginia ? For how many years after the statue of limitations has passed, would my debt still show in my credit report ?

  • J H-elizondo

    If I want to use the “pay by delete” option, what steps do I have to take prior to making a payment arrangement? Is there some sort of contract involved?

    • Ujusmad26

      It would ne ed to be paid in full no payment arrangements for credit deletion

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  • sad sally

    I was recently contacted for a debt that is nearly 20 years old. it was a store credit card. After twenty years do I legally have to pay this????