Why did my credit score drop after paying off $46K in debt?

T

twinscraymond

New Member
Just paid off like 46k in debt
(Always paid on time, but cleared it!)
Thought our credit score would go up, but it actually dropped
(Lost over 100 points bc the account shows as closed)

Any tips or advice?
 
It will rebound soon. Paying off debt lowers credit scores. The system prefers us indebted. No major purchases? Do not worry. Above 720? You already have the best rates.
 
Paying off a car or mortgage can actually lower your score. To see your score go up, you need to use credit. If you have ope n credit cards, use them and check for the statement date on your bill. Pay off what you spent, but leave about 1 3% unpaid, then pay the full balance by the due date. After a few months, you should notice your score beginning to improve. It also helps to have a good mix of credit types, like revolving and installment accounts. You can try things like credit builder loans for that.
 
Yes, what you’re seeing is real and true. When you pay off big chunks of revolving debt and close those accounts, it can actually hurt your credit score for a while. It hurts because closing accounts cuts your total available credit, which might push up your overall credit use; it shortens the average age of your credit, and that?matters to scoring models; and having fewer active accounts can even affect your credit mix a little.

I know it feels backwards, but this dip usually doesn’t last. If you keep making payments on time and keep balances low on your other accounts, your score will bounce back.
 
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