Does Paying Off Your Credit Cards Help Your Credit Score?
- Paying off your debt could help your credit score.
- Applying for new credit cards could cost you credit score points.
- Late payments usually damage your credit score.
Table of Contents
- Credit Score Factors and Credit Card Debt
- Why Your Credit Score Could Increase When You Pay Off Credit Card Debt
- Strategic Timing for Credit Card Payments
- Why Your Credit Score Could Drop in the Short Term
- Why Your Credit Score Could Drop (But You Can Rebuild It)
- When to Prioritize Credit Card Debt vs. Other Debts
Credit scores tell lenders about your history as a borrower. But does paying off your debt help your credit score?
Having credit card debt can affect your credit score, and paying down credit card debt could help your credit score while saving you money on interest.
Wondering exactly how paying off your debt could help your credit score? Here’s a closer look.
Freedom Debt Relief isn't a Credit Repair Organization and doesn't provide, or offer, services or advice to repair, modify, or improve your credit.
Credit Score Factors and Credit Card Debt
Your credit score is a measure of how creditworthy you are as a borrower. It's important to understand what goes into credit scores so you can understand the impact credit card debt might have on yours.
There are two main credit scoring models used today—FICO and VantageScore. A credit scoring model is a complex algorithm that uses data to calculate your credit score. FICO and VantageScore are different brands that produce the same kind of product.
Your FICO Score is made up of these factors:
Payment history: 35%
Amounts owed/credit utilization: 30%
Length of credit history: 15%
Credit mix: 10%
New credit: 10%
Your VantageScore is made up of these factors:
Payment history: 41%
Age and type of credit: 20%
Credit utilization: 20%
Balances: 6%
New credit: 11%
Available credit: 2%
In both credit scoring systems, amounts owed/credit utilization carries a lot of weight. The more credit card debt you have, the more it could hurt your credit score. Paying off credit cards lowers your credit utilization and amounts owed, which could lead to a boost in your credit score.
It’s for this reason that it often pays to prioritize paying down credit card balances when you’re trying to get out of debt. Not only might your credit cards have a higher interest rate than your non-credit card debt (such as personal loans or student loans), but paying off credit cards could have a direct impact on your credit score.
Why Your Credit Score Could Increase When You Pay Off Credit Card Debt
Paying off your cards can raise your credit score in a couple of ways. First, when you make your monthly payments on your credit cards on time, it's recorded on your payment history.
Payment history carries more weight than any other factor in your credit score. Scheduling automatic payments to your credit cards is an easy way to stay on top of your due dates.
The next most important factor in your FICO credit score is credit utilization. That’s a fancy way of saying how much of your total credit limit you're using. If you have a $500 balance on a card that has a $1,000 limit, your utilization is 50%. And if you have multiple cards, credit utilization is figured using the total of all the cards’ limits.
For example, let’s say you have three different credit cards. One has a limit of $1,000, another has a limit of $1,500, and a third has a limit of $2,000. Let’s also assume you owe $500 on each credit card.
In this case, your total credit limit is $4,500, and the amount of credit card debt you have is $1,500. That puts your credit utilization at 33%. Credit utilization is calculated as the total outstanding amount you owe on your various credit cards relative to your total credit limit across those cards. It is also calculated on a card-by-card basis (your score is likely to suffer if you have a maxed out credit card, even if you have other credit cards with low balances).
You might hear that it's best to keep your credit utilization to under 30%. However, FICO itself says that your credit score won't necessarily drop once your utilization exceeds 30%.
Generally speaking, it's best to keep your credit utilization as low as possible—not just for the sake of your credit score, but for the sake of keeping your debt to a manageable level.
Think about it this way: If your credit utilization is 30%, it means you’re using 30% of your total available credit limit. If your utilization is 20%, it means you’re using 10% less credit. That means you owe that much less on your credit cards, which could make your payments easier to keep up with.
Different kinds of credit scores, including FICO and VantageScore, consider your credit utilization. The lower your credit card balances are relative to your credit limits, the more it could help your credit score. Generally speaking, as your balance goes down, your credit score goes up.
So how do you do that?
If you have extra cash on hand, you could make a lump sum payment against your credit card debt. A tax refund or bonus from work, for example, could help you wipe out a large chunk of your debt in one go.
Otherwise, you can choose from several pay-off strategies to get out of credit card debt.
Debt pay-off strategies
The debt snowball and the debt avalanche are two popular debt pay-off strategies. Both methods have you order your debts and then apply as much money as possible to the first debt on the list, while paying the monthly minimums on everything else.
Once you pay off the first debt, you roll that debt's payment over to the next debt on the list. You keep doing that until all your debt is paid off.
Not sure which method to choose? Here's how they compare.
| Debt Payoff Feature | Debt Snowball | Debt Avalanche |
|---|---|---|
| Debt payoff order | Lowest balance to highest | Highest interest rate to lowest |
| Motivation | Gets you to your first debt payoff quickest | Saves on interest charges over the long term |
Strategic Timing for Credit Card Payments
Credit card companies generally report outstanding balances to the credit bureaus at the end of every billing cycle. But ultimately, each credit card company of yours might have its own billing and reporting cycle. You can ask each of your credit card issuers when your outstanding balances are reported to the credit bureaus so you understand the timeline.
If you're trying to raise your credit score, it could make sense to try to pay off your credit card balances each month before each credit card company's reporting date. That way, any amount you owe won't count toward your credit utilization, since you'll be paying off your balance before it gets reported.
Pulling off this strategy may require you to make multiple credit card payments during the month. However, if you're unable to pay off your balances before they're reported to the credit bureaus, once you do make your payments, your credit score should reflect that.
In other words, let's say you have a $4,500 credit limit and you rack up a $1,500 balance. That puts you at 33.33% utilization.
If you don't pay that balance by the time it's reported to the credit bureaus, and your credit utilization was previously at 23%, your credit score might drop. However, if you pay off some of that balance by its due date so that your utilization falls back down, that should be reflected in your credit score the following month, or once the credit bureaus have a chance to process that update.
Pro tip: Don't close your credit cards once you pay them off
Let’s go back to credit utilization for a moment. Say you have two credit cards, each with a $500 balance, and each with a $1,000 limit. Right now your utilization is 50% for each card and overall.
If you pay off one card, your utilization is still 50% on the other card. But your overall utilization is now only 25% ($500 owed, with $2,000 in credit limits). And it’s 0% on the paid-off card, which is even better. But if you close that paid-off card, your overall utilization goes back up because you have less available credit.
If your goal is to improve your credit standing, don't close those credit cards right away. Instead, consider keeping the cards open and active.
You can do that by making one small purchase every few months and paying it off right away. Or you can set up a small bill that gets automatically paid from your credit card (like a monthly streaming service subscription fee), and then set your credit card to be automatically paid from your bank account. Either strategy could help you build a positive payment history. Regular use keeps the credit card company from closing the account due to inactivity.
The length of your credit history plays a role in calculating your credit score. Keeping longstanding accounts open is good for your score, and another reason not to close credit cards as soon as they’re paid off.
Why Your Credit Score Could Drop in the Short Term
Paying credit cards on time could help your credit rating, but high interest rates could keep you from paying off balances at a faster pace. In that scenario, you might consider a 0% APR balance transfer offer, or debt consolidation in the form of a personal loan or a home equity loan.
Transferring balances or consolidating them with a loan could save you money on interest and help you pay off debt faster. But there’s a catch. Opening new accounts usually triggers a hard credit inquiry. A hard inquiry is when someone pulls your credit report because you applied for credit.
A soft inquiry doesn’t affect your credit score or cost you any points. If you check your own credit, for example, that’s a soft inquiry.
Hard inquiries show up on your credit history and are factored into your credit score. Each new hard inquiry can trim a few points off your score, even if the lender pulling your credit doesn’t approve your application.
So how can you avoid that? Here are a few tips for consolidating debt while minimizing negative credit score impacts.
Shop around. If you're interested in debt consolidation loans, take time to scout out rates, fees, and loan terms from a few lenders before you apply. Some lenders can give you information by doing a soft inquiry that doesn’t hurt your score.
Get preapproved. Lenders might offer preapproval quotes so you can get an idea of what loan terms you qualify for. Just remember to ask whether preapproval requires a hard credit check.
Limit applications. Even one hard inquiry could affect your credit score. If you're planning to consolidate debt, you may want to apply for just one loan or balance transfer offer instead of several.
Pro tip: Avoid taking on new debt after consolidation
Consolidating debts with a loan or balance transfer offer could help your credit in the long run if you're steadily paying down what you owe. But running up new debt can work against you.
New credit inquiries could hurt your credit score. Also, if you’re carrying high balances on one or more credit cards, your score could suffer.
Running up debt on credit cards that you just paid off with a consolidation loan or balance transfer is self-defeating and could lead to a debt hole that’s even harder to dig out of.
Why Your Credit Score Could Drop (But You Can Rebuild It)
If you’re struggling to pay off your credit card debt, you may want to try debt settlement. That’s when a creditor agrees to accept less than the full amount you owe.
On your credit report, your accounts may be listed in different ways, and each has a different implication for your credit score. Open accounts are ones that are active. If you're current on payments, those open accounts could help your credit score.
Closed accounts are those that are no longer active. You may have a closed account due to paying off a loan. Accounts closed in good standing stay on your credit reports for ten more years.
Believe it or not, a closed account could have a negative impact on your credit score, even if your account was closed and paid in full. That's because a closed account could eventually shorten the average length of your credit accounts when it falls off your credit report, which is another factor in your credit score. A closed installment loan could also leave you with a less favorable credit mix, leading to a drop in your score.
When you settle a debt, your account generally appears as settled on your credit report. That could cause you to lose points as well. But a settled debt is still better for your credit score than a debt that’s in collections.
Generally, creditors don’t agree to accept less than you owe unless it’s clear that you’re already struggling. That often means your accounts are already in default. It’s default or collection status that hurts your credit score the most.
Payment history is the most important factor in credit scoring. If you pay late or stop paying altogether, your score could suffer a serious blow. Not only that, but your creditors might sue you to collect what's owed.
Settling your debts could put you on stronger financial footing, making it easier to get caught up and stay caught up on your bills. If you settle your debts and then make on-time payments going forward, that could put you in a better position to build and maintain a higher credit score. Keeping your credit card balances low relative to your credit limit could also help you rebuild credit after debt settlement.
Anyone can negotiate their own debts, but some people find doing so overwhelming or confusing. In that case, there are professionals who can walk you through it. Here’s how professional debt settlement works:
Each month, you set aside money in a dedicated account. You’re building up funds to offer your creditors. If you work with a professional debt settlement company, they’ll set up the account for you. You own it and always have access to it.
The debt settlement company negotiates with your creditors to reach a settlement agreement. Any agreement should be presented to you for approval before it’s finalized.
Once a settlement is reached, your creditor is paid from your dedicated account. The debt settlement company’s fee is also paid out of your dedicated account.
Any remaining balance on the debt is forgiven.
Negotiating debt could help you avoid bankruptcy, which you may find more stressful than debt settlement.
When does it make sense to choose bankruptcy vs. debt settlement? Here's how they compare.
| Debt Settlement | Bankruptcy |
|---|---|
| Resolve debts for less than what’s owed. | Chapter 7 bankruptcy can erase some debts, but you could lose some of the things you own. Chapter 13 is a three to five year payment plan. |
| Negative impact on credit score, but the impact could fade over time. | Negative impact on credit score, but the impact could fade over time. |
| Private | Public record |
| You may need a certain amount of debt to qualify. | Eligibility for Chapter 7 is based on your income and ability to pay. |
| Can’t stop collections | Temporarily stops collections, including foreclosure. |
Talking to a debt expert could help you decide which option makes sense for you.
Pro tip: Check your credit reports regularly
If you're settling your debt, it's important to review your credit reports routinely to make sure those debts are being reported properly. If you find that a settled debt is still being reported as past due, you can open a dispute with the credit bureau that's reporting the information.
The credit bureau is required to investigate your dispute. Errors must be removed or corrected, which could help add some points back to your score.
When to Prioritize Credit Card Debt vs. Other Debts
When you're trying to pay off debt, it can be tricky to decide which to tackle first. It could pay to prioritize credit card debt if you're trying to get your credit score to a better place.
Credit utilization is an important factor in calculating your credit score. Credit utilization only accounts for revolving credit card debt. Installment loans, like personal loans and student loans, are not reflected in your credit utilization.
Paying off a personal loan or student loan is still a good thing, as it leaves you with one fewer debt to pay each month and can help free up room in your budget for other expenses. But from a credit score perspective, it generally pays to prioritize your credit cards over other types of debt.
If you have credit card balances that are coming due and are trying to juggle those with accounts in collection, you may want to focus on your active balances first. An account that's in collections has already caused damage to your credit score. Making a payment on an active account could prevent that account from causing damage to your credit score.
That said, if you're being sued for an unpaid debt that's in collections, settling that account could prevent your creditor from being able to garnish your wages to get repaid. Before you prioritize an account that's in collections, be sure to check your state's statute of limitations for debt. If it's beyond the time when a creditor can file a lawsuit against you, then you may not want to prioritize an account that's in collections.
How to Monitor Monitoring Your Credit Score Progress
Whether you're settling your debt or attempting to pay off your credit cards, it's important to keep tabs on how your credit score is doing. One thing you should know is that you're entitled to a free copy of your credit report each week from each of the three credit bureaus—Equifax, Experian, and TransUnion—that you can request here.
You should also know that the three credit bureaus offer credit monitoring services. These include free options and paid services that include identity theft protection. There are also outside credit monitoring options you can pay for.
If you're in the process of trying to pay off debt, you may want to check your credit report and score once a month. Checking more frequently than that might frustrate you, since it can take time for updates to appear on your credit report and get reflected in your credit score.
You should also know that while you're in the process of paying off debt, your credit score can fluctuate. It might go down a lot one month, rise a bit the next month, and then drop back down the month after that.
Don't get discouraged if there's a month when your credit score doesn't go down or rises slightly. The goal is to get your credit score to a better place over time.
Most people do not see a vast improvement in their credit score overnight. The amount of time it takes to improve your credit score can hinge on different factors. For some people, it could take six months. For others, it could take a couple of years.
If your credit score is generally trending in a positive direction, take pride in the progress you're making rather than stress that your score hasn't reached a certain number within a specific time frame.
People just like you are seeking debt relief in Missouri and across the country. The first step is the most important one—explore your options.
Debt relief by the numbers
We looked at a sample of data from Freedom Debt Relief of people seeking credit card debt relief during November 2025. This data reveals the diversity of individuals seeking help and provides insights into some of their key characteristics.
Credit card tradelines and debt relief
Ever wondered how many credit card accounts people have before seeking debt relief?
In November 2025, people seeking debt relief had some interesting trends in their credit card tradelines:
The average number of open tradelines was 14.
The average number of total tradelines was 24.
The average number of credit card tradelines was 7.
The average balance of credit card tradelines was $15,142.
Having many credit card accounts can complicate financial management. Especially when balances are high. If you’re feeling overwhelmed by the number of credit cards and the debt on them, know that you’re not alone. Seeking help can simplify your finances and put you on the path to recovery.
Collection accounts balances – average debt by selected states.
Collection debt is one example of consumers struggling to pay their bills. According to 2023, data from the Urban Institute, 26% of people had a debt in collection.
In November 2025, 30% of debt relief seekers had a collection balance. The average amount of open collection account debt was $3,203.
Here is a quick look at the top five states by average collection debt balance.
| State | % with collection balance | Avg. collection balance |
|---|---|---|
| District of Columbia | 23 | $4,899 |
| Montana | 24 | $4,481 |
| Kansas | 32 | $4,468 |
| Nevada | 32 | $4,328 |
| Idaho | 27 | $4,305 |
The statistics are based on all debt relief seekers with a collection account balance over $0.
If you’re facing similar challenges, remember you’re not alone. Seeking help is a good first step to managing your debt.
Tackle Financial Challenges
Don’t let debt overwhelm you. Learn more about debt relief options. They can help you tackle your financial challenges. This is true whether you have high credit card balances or many tradelines. Start your path to recovery with the first step.
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Author Information
Written by
Maurie Backman
Maurie Backman is a personal finance writer with over 10 years of experience. Her coverage areas include retirement, investing, real estate, and credit and debt management.
Reviewed by
Kimberly Rotter
Kimberly Rotter is a financial counselor and consumer credit expert who helps people with average or low incomes discover how to create wealth and opportunities. She’s a veteran writer and editor who has spent more than 30 years creating thousands of hours of educational content in every possible format.
How is the debt avalanche method more cost-effective than the snowball method?
The avalanche method is more cost-effective than the snowball method because it gets rid of your most expensive debt first.
The snowball method prioritizes motivation, while the avalanche prioritizes savings.
Getting out of debt isn’t easy or quick. It takes commitment and a stick-to-it attitude. That’s why the snowball method may be more popular. It’s often the fastest way to get to your first debt payoff, which is a big cause for celebration.
If you play around with an online debt snowball vs. debt avalanche calculator, you’ll see that following the avalanche method could cut about a month off your debt payoff timeline. That may be more significant than it sounds. This one-month payment could be a big one, because at this point, you’re paying off your last debt with a payment that includes all the payments you were making against all of your debts.
But no debt payoff plan is effective if you can’t stick with it.
Only you can decide which DIY method is a better fit for you.
Should I focus on paying off my debt or building my emergency fund?
Paying off debt is the first priority, but having some money saved for unplanned expenses can help keep you from going further into debt. A good rule of thumb is to save a modest amount, say $1,000 or $1,500, and then focus on paying down your debts. The third step would be to increase your emergency fund.
How long does it take to pay off debt?
If you attack your debts aggressively (not including the mortgage) it's possible to pay them off in two to five years. If you are paying an installment loan as agreed, the payoff time depends on the loan's term. A 30-year mortgage takes 30 years to pay off unless you make extra payments.
Will paying off my credit card in full every month guarantee a good credit score?
No. Paying off your credit cards in full each month is a good thing for your credit score, but there are other factors that go into that number, including timely payments and the age of your credit accounts.
Should I pay off credit cards or collections accounts first?
Whether you should prioritize credit cards versus collections depends on whether your primary goal is to improve or preserve your credit score, and how old those collections accounts are.
Credit Card Debt
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