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.
Credit scores tell lenders about your history as a borrower. But does paying off your debt help your credit score?
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 helps your credit score? Here’s a closer look.
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 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.
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 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 |
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. 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, 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.
When you pay off a debt this way, it’s not reported as positively as paying off your complete balance. But a settled debt is still better for your credit score than a debt that’s in collections.
Generally, creditors don’t agree to discount what 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.
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.
Once a settlement is reached, the debt settlement company uses funds from your dedicated account to pay it. 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 3-5 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. You can go over your budget and financial situation to figure out the best way to manage your credit card debt if you've fallen behind.
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.
Debt relief by the numbers
We looked at a sample of data from Freedom Debt Relief of people seeking credit card debt relief during September 2025. This data reveals the diversity of individuals seeking help and provides insights into some of their key characteristics.
Credit card balances by age group for those seeking debt relief
How do credit card balances vary across different age groups? In September 2025, people seeking debt relief showed the following trends in their open credit card tradelines and average credit card balances:
Ages 18-25: Average balance of $9,117 with a monthly payment of $279
Ages 26-35: Average balance of $12,438 with a monthly payment of $373
Ages 36-50: Average balance of $15,436 with a monthly payment of $431
Ages 51-65: Average balance of $16,159 with a monthly payment of $533
Ages 65+: Average balance of $16,546 with a monthly payment of $498
These figures show that credit card debt can affect anyone, regardless of age. Managing credit card debt can be challenging, whether you're just starting out or nearing retirement.
Home-secured debt – average debt by selected states
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) (using 2022 data) the average home-secured debt for those with a balance was $212,498. The percentage of families with mortgage debt was 42%.
In September 2025, 25% of the debt relief seekers had a mortgage. The average mortgage debt was $236504, and the average monthly payment was $1882.
Here is a quick look at the top five states by average mortgage balance.
| State | % with a mortgage balance | Average mortgage balance | Average monthly payment | |
|---|---|---|---|---|
| California | 20 | $391,113 | $2,710 | |
| District of Columbia | 17 | $339,911 | $2,330 | |
| Utah | 31 | $316,936 | $2,094 | |
| Nevada | 25 | $306,258 | $2,082 | |
| Massachusetts | 28 | $297,524 | $2,290 |
The statistics are based on all debt relief seekers with a mortgage loan balance over $0.
Housing is an important part of a household's expenses. Remember to consider all your debts when looking for a way to get debt relief.
Regain Financial Freedom
Seeking debt relief can be the first step toward financial freedom. Are you struggling with debt? Explore options for debt relief to regain control of your finances. It doesn't matter how old you are or what your FICO score or credit utilization is. Take the first step towards a brighter financial future today.
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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
Kailey Hagen
Kailey is a CERTIFIED FINANCIAL PLANNER® Professional and has been writing about finance, including credit cards, banking, insurance, and retirement, since 2013. Her advice has been featured in major personal finance publications.
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 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 is 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 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.
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