Q&A: What happens to your credit score if you pay off all your debt and never get another credit card?
Question by nickolasname: What happens to your credit score if you pay off all your debt and never get another credit card?
I have a tremendous amount of bad debt. Almost 2000 dollars. If I were to pay it all off to 0 would it raise my score or just keep it from getting lower? I have no intention to EVER EVER EVER have another credit card. my credit score is in the low 500s what will happen if I pay off all debt and do nothing to raise my score?
Best answer:
Answer by Kathy P
It would raise your credit score to pay off your accounts. But don’t close the accounts. Just cut up the cards if you don’t want to use them. Or use them once in a while, and pay it off right away. One of the things they use to figure your score is how long you have had your accounts. So keep the accounts open, as that will help increase your score.
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The best way to raise your FICO score is to make installment payments. Just what the credit card companies want. Paying off your balance will make a small increase in your FICO. If you can pay that sucker off. DO IT and never use your cards again. Develop an emergency fund of $ 1-2K and then put away 3-6 months of expenses. Develop a budget and don’t worry about FICO. Buy what you can afford and screw FICO. Good luck and keep on the path!!
I agree with previous post..DO NOT cancel your cards and periodically you need to put a single charge of any amount and then pay it off at the time the statement comes in to maintain the account otherwise the credit card company will cancel your card for inactivity. Having at least one good card with adequate credit will truly assist you in keeping your score up and in a true emergency where a card is absolutely needed to rent a car or pay a taxi you must discipline your mind that it is only there to help you in a real jam. This will teach you the importance of responsible spending within your limits. If you do not have the cash in your pocket to place in a safe place to pay for those expenses then you do not place it on the card period unless you are in a dire situation and stranded and your back is against the wall.
If you close the accounts then your score will be lowered even if paid in full. Pay them off and never look back. Credit cards are a big waste of time now that we have debit cards. Honestly, I haven’t had a credit card in 15 years and do not have credit anywhere else. I buy my cars in cash and while I don’t have a high credit score by any means I have not been denied a job, nor housing because of it. When your score is pulled it’s not just the score but also any loans outstanding. I know this because I used to be in car sales. Your credit score is just part of the picture. Honestly, if you can’t save for it you can’t afford it. Don’t become a slave to the credit card companies. They are a major scam. FYI two of the responses tell you to leave the accounts open and to charge something every one in a while. That is BS and is obsolete. Credit card companies will drop you now if you do that.
Do you think that 2000 dollars is a tremendous amount of debt. That is a drop in the bucket compared to some people that have $ 100,000 in credit card debt. Pay them off. People say not to close them because it lowers your score when you close them. But, if you pay a monthly fee just to keep them open, or a yearly fee, I would say close them to save money. It might lower your score at first, but your score will improve in time. Just use one and pay it off each month. Just charge a little bit for things that you need. This will show that you are responsible. You need a card, because it is hard to rent a car on vacation without one. You can use a debit card, but the rental agencies want hundreds of dollars for a deposit.
Hate to tell ‘ya, but nowadays $ 2,000 in debt is NOT a tremendous amount of debt! Credit card companies deal with people like you ALL the time…
The U.S. is freakin’ ‘cos people all over have *many* times that amount in debt! They charge for boats, planes, automobiles, etc., so you see, again $ 2,000 is NOTHING!!!
This is gonna sound odd, but it happened just the same and it really pissed me off ‘cos I found out what I did wrong when it was too late.
I could never qualify for a major credit card so I applied for… and got… a credit line through a national jewelry chain. I needed the credit so figured what the heck, right? WRONG!!! I had it for a few years and was able to acquire a few pieces of jewelry. Thinking I was doing the right thing, once I paid off my charges, I closed it out.
When I attempted to re-open it so as to get my children some nice graduation gifts, I was unable to do so and *that* was when I found out that I should have kept it open and just charged the minimal of $ 25 a month! Well, who needs that much jewelry?
I was fed up and discouraged and never did it again.
Personally I’m not big on plastic as *I* feel that it’s too much of a headache all the way around; for the customers *and* the merchants!
The percentage rates are through the roof and when you make a small purchase, it only seems to double the original price of the charged item. That in turn raises prices, sometimes making for late payments and then the merchants have to wait for payments…
Me, if I can’t afford it, I don’t need it…
My advice to you is to be extremely diligent and not charge over what you can afford. By doing so you won’t be making any late payments, which also affects your credit.
People are told that all the time, but they forget. The key is NOT to forget, but having instant cash can be quite the temptation and living in a society that wants instant gratification makes the temptation all the harder!
Good luck!
First off $ 2000 is not a “tremendous amount”, at least not to the bank who issued the credit card. You say it is bad dept but you didn’t explain why you feel it is bad. Paying it off will usually help raise your credit score but not dramatically. You may say you will never ever have another credit card but most likely you will buy a car or a house or some other item that will require a credit check so it’s best to get your credit rating built back up. Also a high credit rating means lower interest loans so its worth having good credit. This is not difficult but does take time.
I’d pay off my debts if possible, keep my credit cards and use them but keep paying them off. It just takes self control. Within a few years your credit will have a fairly high rating.
First, ignore the posts where 2000 is not a lot of debt. Each individuals situation is different and it may be a lot in your situation.
When you pay off your balance do so in monthly installments greater then the minimum doing so will save you more money in the long run.
Keep the card active if the credit card company does not raise interest rates with no provocation (late payments etc.) Use the card sparingly and at no time use anymore then 30% of your credit limit. (2000 is max only use up to 600 at any time) Doing so demonstrates financial responsibility and will over time raise your score. Credit builds over time and the longer you demonstrate consistent consumer responsible, the greater your credit rating will be. Applying for credit in itself will negatively affect your score. Be mindful of this. It is a good idea to get your credit scores yearly so you can monitor your progress.These are available free so do not be fooled into paying for what is rightfully yours.
2 grand ?..to those “wall street” types,we taxpayers just gave a couple TRILLION to-to keep wall street alive…them people would spend that Much on a dinner for maybe five couples!!..
–it still blows my mind when i throw nearly fifty bucks into my gas tank!
-with credit-CALL THEM!-talk to them,make some arrangements,..they know everyone’s broke!!-it’s weather you stand up and deal with the debt,or try to ignore them when they just want to find out what you CAN do to settle the debt?..even if you pay them 1 dollar,that’s at least a good will gesture!
-we all can find better things to do with our money-than pay bills,but when you don’t-they start turning off the cable,lights,etc….i’ve personally found that when you sit in your house without electricity-it gets your attention!!that’s when you start putting effort into fixing the problem!!and even if you dont have the money,maybe you find a program to help with the power bill..
–i’m glad ths got you to start thinking about how mutch damage you can do to your future with a credit card!..be responsible!..talk to them,and work it out!..don’t let them bully you,but pay them off as soon as you can,because they charge interest!! good luck!
The only way to raise your FICO credit score is to have credit accounts and use them responsibly. If you close your credit card accounts and never open one again or never take out any other kind of loan, then your credit score will not go up.
I’m another one who hasn’t had a credit card in more than 15 years and I’m fine. Paid cash for my car and my credit score is good enough when potential landlords take a look.
One issue: cell phones. If for some reason I wanted a cellphone contract, I’d probably have to leave a deposit. However, I DON’T want a contract and I don’t have one. And that means I paid full price for my phone ($ 500). Well worth it for the freedom to adjust my plan or even end it during any month.
I do believe the whole FICO thing is way out-dated.
With the widespread foreclosures, we’ve got to re-think our relationship to home ownership. We may end up like some parts of the world where renting makes more sense than buying. If that happens, FICO scores will be less relevant for lots and lots more people.
It would improve your score a bit, but if you never get a loan or use a credit card again, your score will NOT go up. After having a bad run of using credit unwisely, you have to reestablish yourself and show you actually CAN handle money. If you never borrow again, you haven’t shown you learned from your bad experience, and it won’t show that you can pay bills on time.