Is It True Your Credit Score Goes Down When You Pay Off Your Credit Card Debit?

AC Man

Debt*

I now have the cash to pay off our CC debt from a couple years ago when my late son had cancer. He had great insurance, but we ran up about 45k helping him and his fiance out. I keep hearing if you pay it all off your score goes down. Is this really true? I'm paying it off anyway and is a miniscule problem in my life, but thought I would ask.

SC53

Yes. Debt scores are directly related to the amount of debt and your ability to pay it off.
Run up debt, pay it off, great score.
Pay cash, no debt payments, score will drop, eventually to zero if you go long enough on cash.

SAENole

Sorry to hear the backstory, AC.

mplspug

Just keep 5% - 10% of you available balance. It can just be on one card and don't close the other credit card accounts. That should raise your score.

Sorry to hear the back story as well.

Sent from my SM-G935V using Tapatalk

mplspug

Also, most credit cards have online tools where you can enter things and see how it will affect your score.

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cadman

No it is not true. If you use a credit card and pay it off every month your score can still be quite high.

The other issue is your utilization rate.

http://www.bankrate.com/finance/credit/credit-score-fall-after-paying-loan.aspx

http://budgeting.thenest.com/becoming-debt-affect-credit-score-20809.html

https://www.thebalance.com/how-having-a-zero-balance-affects-your-credit-score-960530


Now if you pay them off and quit using them it can effect your score. Read the above links to maximize your credit score.

dave44

Hmm. Never thought I would need to carry debt to keep credit score high.

dave44

cadman wrote: »

No it is not true. If you use a credit card and pay it off every month your score can still be quite high.

The other issue is your utilization rate.

http://www.bankrate.com/finance/credit/credit-score-fall-after-paying-loan.aspx

http://budgeting.thenest.com/becoming-debt-affect-credit-score-20809.html

https://www.thebalance.com/how-having-a-zero-balance-affects-your-credit-score-960530


Now if you pay them off and quit using them it can effect your score. Read the above links to maximize your credit score.

Glad to see this. It's the way we use our cards.

By the way Cad, love the avatar.

cadman

dave44 wrote: »

Hmm. Never thought I would need to carry debt to keep credit score high.

You don't need to carry debt to have a high score. You need to charge every month to have a high score, You can it off every month and keep a high score. The bank reports your balance before the payment is made. If you have a $5000 limit and charge $1000 every month and pay it off to zero every month, the bank reports your balance as $1000 every month. this gives you a low utilization rate of 20%. well below the 30% limit that effects your score.

cadman

dave44 wrote: »

Glad to see this. It's the way we use our cards.

By the way Cad, love the avatar.

Thanks.

I am working on getting debt free real soon. My brother is debt free and uses his credit card like I said and his score is very high. You can get your score free from any of your credit card issuers online. Every one of mine has a link to a free score with no gimmicks. I check mine every six months just to see where it is going. Mine is very good, but I want it to get to the excellent criteria.

The funny thing to me is, to be able to get the best credit rates, you have to not need any credit.

Menzies

AC, pay it off.

The impact on your score is minimal.

Your feeling of total satisfaction being debt free will outweigh ANY immaterial points reduction.

Go ahead and join Credit Karma. You can actually simulate the impact of paying it off on your score on that site. You can also track your credit on a weekly basis.

dave44

cadman wrote: »

Thanks.

I am working on getting debt free real soon. My brother is debt free and uses his credit card like I said and his score is very high. You can get your score free from any of your credit card issuers online. Every one of mine has a link to a free score with no gimmicks. I check mine every six months just to see where it is going. Mine is very good, but I want it to get to the excellent criteria.

The funny thing to me is, to be able to get the best credit rates, you have to not need any credit.

As I know you are aware, Occasionally we take on debt to expand our little piece of the pie. A little here, pay it off, a little there, pay it off. It's our growth strategy.

I may have said it here before, maybe not.

I had heard once " rich people use other people's money to buy assets, poor people use other people's money to buy junk."

I try to live by that. And it's a lot deeper than it appears on its face.

( does the item appreciate or depreciate?)

Can't remember who that quote came from however, or if that is just my interpretation of it.

cadman

Menzies wrote: »

AC, pay it off.

The impact on your score is minimal.

Your feeling of total satisfaction being debt free will outweigh ANY immaterial points reduction.

Go ahead and join Credit Karma. You can actually simulate the impact of paying it off on your score on that site. You can also track your credit on a weekly basis.

Credit Karma sells your data to make money. I get too much junk email already.

Menzies

cadman wrote: »

Credit Karma sells your data to make money. I get too much junk email already.

Not from my experience. But then I used this! No more credit card apps etc. Zero, zilch. It's like magic!

https://dmachoice.thedma.org/

AC Man

cadman wrote: »

Thanks.

I am working on getting debt free real soon. My brother is debt free and uses his credit card like I said and his score is very high. You can get your score free from any of your credit card issuers online. Every one of mine has a link to a free score with no gimmicks. I check mine every six months just to see where it is going. Mine is very good, but I want it to get to the excellent criteria.

The funny thing to me is, to be able to get the best credit rates, you have to not need any credit.

That's why I applied for a line of credit at my business when I was fat and happy and diddn' t need it. Then the crunch and after a few years I needed it briefly. Glad I had it cause if you need it you ain't getting it.

My CC is paid off every month. The wife ran them up for reasons stated. Never missed a payment can't be good. Paying them off in full this week regardless of credit score. We are still around 785, but I don't know how other than we have never been late.

JKP

dave44 wrote: »

As I know you are aware, Occasionally we take on debt to expand our little piece of the pie. A little here, pay it off, a little there, pay it off. It's our growth strategy.

I may have said it here before, maybe not.

I had heard once " rich people use other people's money to buy assets, poor people use other people's money to buy junk."

I try to live by that. And it's a lot deeper than it appears on its face.

( does the item appreciate or depreciate?)

Can't remember who that quote came from however, or if that is just my interpretation of it.

Yep. If it drives, flies, floats or screws lease it has some truth to it. Especially if one turns vehicles every two to three years.

cadman

AC Man wrote: »

That's why I applied for a line of credit at my business when I was fat and happy and diddn' t need it. Then the crunch and after a few years I needed it briefly. Glad I had it cause if you need it you ain't getting it.

My CC is paid off every month. The wife ran them up for reasons stated. Never missed a payment can't be good. Paying them off in full this week regardless of credit score. We are still around 785, but I don't know how other than we have never been late.

I did the same thing with my line of credit. I used it in 2009 due to the recession.

I have debt from the recession still and my score is around 750. I am never late and pay over the minimum. My debt to income is good too.

My brother has one credit card he uses and pays off every month to a zero balance and his score is well above 800. I thought his would be lower since he never carries a balance. Then I read how they report those things and it made sense why his was so high. He would charge around 10% of his limit but pay it off. It gave him a great utilization score and an excellent rating.

AC Man

I never carried any debt with credit cards. Always payed off every month. My wife is a softy helping out my son and his girlfriend and I love her for that. Again time to payback financially. Gonna happen this week.

Menzies

If you want to manage debt, look to credit against an asset.

Credit card debt percentages in the high teens.

Mortgage rates ~ 3.5% with decent credit. If you are in a high tax bracket (say 49.6) then that after tax deduction rate goes to 1.7%. That is buying an asset over time using someone else's money. Even if you have the cash to buy the asset, invest it instead into a low-risk product - hell even into a muni. You will be bringing in a lot more that 1.7%.

Be smart.

AC Man

Bottom line, we had a good couple years and as much as I hate it I would rather pay off what I owe(actually the wife) than keep it. Oweing money drives me insane. Unlike many of my customers that won't pay their bills.

Menzies

AC Man wrote: »

Bottom line, we had a good couple years and as much as I hate it I would rather pay off what I owe(actually the wife) than keep it. Oweing money drives me insane. Unlike many of my customers that won't pay their bills.

Do it.

Sleep soundly. The new boat can wait.

restlessnative

AC Man wrote: »

I never carried any debt with credit cards. Always payed off every month. My wife is a softy helping out my son and his girlfriend and I love her for that. Again time to payback financially. Gonna happen this week. Very sad dealing with the loss of my son, but you have to move forward, although I have my moments and don't want to.

The small amount your credit score may change is nothing compared to sleeping better at night and staying true to your morals, especially given the situation. My only sibling was killed in accident and I don't think my dad ever got over it, whom also passed away a few years later from cancer. Life sometimes deals you tough hands, but from what I can tell you are a good person and believe that will get you through the hard times more than any debt will.

AC Man

Agreed. No you are never the same. Thanks!

FLDXT

I paid off a student load, on payments and reduced all my cc by 80%, dropped my credit score 15pts, ridiculous.

Triple Threat 33T

FLDXT wrote: »

I paid off a student load, on payments and reduced all my cc by 80%, dropped my credit score 15pts, ridiculous.

The way they look at things does seem kind of silly sometimes.

Flash

cadman wrote: »

No it is not true. If you use a credit card and pay it off every month your score can still be quite high.

The other issue is your utilization rate.

http://www.bankrate.com/finance/credit/credit-score-fall-after-paying-loan.aspx

http://budgeting.thenest.com/becoming-debt-affect-credit-score-20809.html

https://www.thebalance.com/how-having-a-zero-balance-affects-your-credit-score-960530


Now if you pay them off and quit using them it can effect your score. Read the above links to maximize your credit score.

I agree, we pay it off each month and have been doing so for years. Still have a high Credit score.

Gary S

Everything I own is paid off. House, 2 vehicles ,3 boats and credit cards. I use credit cards for everything, and wife pays them off at the end of the month. Our rating is in the high 700s.

Gary S

I also don't have a debit card. Don't like the idea of someone going into my account and taking money. If someone gets your information and gets into your account you lost that money until you prove it was taken. When someone gets my credit card information I still have my money while I dispute claim. And you build credit by using credit card. Not so sure about debit card.

treemanjohn

Debt free for almost 2 decades. Never a mortgage or car payment. I have 2 American Express accounts that get paid off monthly. My credit score is very high.

Soda Popinski

We only have car/mortgage payments. Obviously that's more than enough debt. But i use the credit card to buy gas, with all the skimming going on, you can dispute a charge, rather than those scum bags cleaning out my bank account and finding out later.

So i run up a balance and pay it off at the end of the month on the CC. but never carry a balance.

Mango Man

It makes no sense the way they compute the scores.

August a year ago we took a New England trip and I placed all the charges on my CC. (Which the CC company knew about so as not to get declined.)

Returned home and paid off the balance in full. I NEVER run a balance. Checked my cc score and it had dropped by 20 points. :huh :shrug

I have a very high score and like it that way.

It slowly made it's way back but with no rhyme or reason.