How much will my credit score increase after paying off credit cards?

First off, if you’re about to pay off your card or are on the journey, congratulations!

Second, well, it depends since your credit score is made up of multiple factors including your payment history, credit utilization (how much credit you’re using versus how much you have available), the length of your credit history, new credit inquiries, and your mix of credit types. 

Here’s a rough guide to understanding how your credit score might change:

Credit utilization: This is a big one. It accounts for about 30% of your credit score. If you pay off credit card balances, especially if you are close to your credit limits, you lower your utilization ratio, which can positively impact your score. For example, if you had a $2,000 balance on a card with a $10,000 limit, you were using 20% of your available credit. If you pay that off, your utilization drops to 0% for that card, which is good for your score.

Overall financial picture: If paying off your credit cards also means you’ve paid down a significant portion of your overall debt, your score could see a noticeable jump.

One-time increase vs. gradual improvement: Some people might see a significant increase in their score shortly after paying off their debts, especially if high credit utilization was weighing their score down. For others, especially if they have other issues like late payments or collections, the improvement might be smaller and more gradual as they work on building a positive payment history over time.

Important: Keep in mind that paying off your cards is not the same as closing them.

Paying off your credit cards is a move in the right direction. But closing a credit card after you’ve paid it off might hurt your score. That’s because closing an account reduces your overall available credit, which in turn can increase your credit utilization ratio (a key factor in your credit score). 

Plus, if it’s a card that’s been in good standing and has a long history, closing it can shorten your average credit history length. Both your credit utilization and the length of your credit history are significant components of your credit score.

If you’re working on building your credit score, StellarFi can help. StellarFi is a tool that helps you build your credit score using the bills you already pay. 

Use this calculator to see how much your score could increase with StellarFi.