For U.S. consumers, having “good credit” or a good credit score is everything. Black marks on your credit report can prevent you from acquiring rental housing, certain jobs, or student loans – and cost you thousands of dollars in higher interest for your mortgage, medical loans, vehicle loans, and other lines of credit.
Yet for many of us, our credit score is a black box. No one knows exactly every single detail that goes into tabulating your score.
But with the FICO system around since 1989, most finance experts have a pretty good idea of how it works. Pay your bills on time, that’s good. Pay your bills late (or not at all), that’s bad. But beyond that, there are far more intricacies.
Here’s what you need to know about how paying your credit card or cards in full will impact your credit.
If I Pay Off My Credit Card in Full, Will My Credit Limit Increase?
According to Experian, one of the 3 major credit bureaus, paying your balance in full can eventually raise your credit limit. But it might take some time for your responsible payment history to increase your line of credit.
Many credit card companies review their customers’ files every 6 months or 12 months and will raise the card limit then if they meet certain criteria.
If you want an increase in your available credit and have been responsibly maintaining your account, you may be best off directly contacting your credit card issuer and asking them for an increase. You can likely do this on their website or in their app.
If I Pay Off My Credit Card in Full, Will My Credit Score Increase?
Yes, it should, over time. But there are some exceptions:
- If your score is already a perfect 840, there’s no way for it to get any higher.
- HELOC (Home Equity Line of Credit): there will be no change to your score. (But late HELOC payments will lower your score.)
- Balance transfer credit cards: there will be no change to your score. (But late credit card payments to a balance transfer card will lower your score.)
- You have other credit cards or lines of credit that are late or delinquent.
In general, paying your credit card balance in full will increase your score if you make the payment by cash, check, money order, personal loan, or a debt consolidation loan.
What Goes Into My Credit Score Calculation?
The big credit scoring bureaus—Equifax, TransUnion, and Experian—don’t publish their algorithms and formulas. But as you’ve likely noticed, your score will vary a bit with each one.
Fair Isaac Corporation (FICO), the most commonly used credit scoring agency, does share the exact data inputs they look at to grade consumers. They share the type of data they take into consideration, and how much weight is given to each.
- 35% of your score: Payment history (Paying all debts on time each month.)
- 30% of your score: Amount owed (Total amounts across all lines of credit. Maxing out all of your credit cards, or high credit utilization ratio, can have a negative impact.)
- 15% of your score: Length of credit history (Average age of your credit or the age of your oldest line of credit — the older the better. Positive history on a card you’ve had for 12 years is better than positive history on a credit card account you’ve had for 2 months.)
- 10% of your score: Credit mix (Different types of debt owed, including auto loans, home mortgages, or unsecured credit card debt.)
- 10% of your score: New credit (This includes hard inquiries from potential lenders and debt collection agencies.)
Your credit utilization ratio is the second most important factor in reaching your FICO credit score. This means the total you owe on all lines of credit compared to your total available credit. It’s recommended that your total credit utilization rate does not exceed 30%.
Even if you owed only $1,000 in total debt, depending on your total available credit, it would have a very different impact on your score.
Scenario 1: Negative impact on your credit:
You owe $1,000 in total debt and have only one line of credit: a credit card with a $1,500 limit. This would place your utilization rate at 67%, more than double the recommended 30%.
Scenario 2: Positive impact on your credit:
You owe $1,000 in total debt and have two credit cards with a combined total limit of $5,000. (One card with a $1,500 limit and a second card with a $3,500 limit.) If you take $1,000 divided by $5,000, you reach 20% – a utilization rate well below the recommended 30% ratio.
As a general rule, the lower the utilization rate the better. The borrower in Scenario 1 could improve their credit profile by asking for an increase in their credit limit or applying for a second credit card to increase their total overall limit.
How Much Will My Credit Score Go Up After Paying Off My Credit Cards?
How much your score goes up depends on how high your utilization was before. If you were maxing out all of your cards every month and making only minimum payments, your score could jump by 10 points or more.
But if you hadn’t been using most of your available credit (i.e., you had several credit cards you weren’t using), then you might only gain a couple of points for paying off the balance in full of one card.
How Long Will It Take My Credit Score to Improve After Paying My Credit Card Balance in Full?
Your credit score should go up within a month of paying your credit card balance in full.
Every month, your credit card company will send a report to the credit bureaus and your balance information will be updated.
This is an extremely quick lift to your rating. Many other credit-related activities can take several months, or even years, to boost your score. Some delinquencies, for example, can remain on your record for up to seven years.
Why Did My FICO Score Go Down After Paying Off My Balance in Full?
In general, your score should go up after you pay off your credit card bill in full. Your FICO score would only go down after paying the full balance if you:
- Paid the balance in full and then immediately closed your credit card, thus lowering your total available line of credit.
- There’s other negative activity – identity theft or otherwise – on your credit report that’s unrelated to the full balance just paid. If your credit score goes down after paying a balance in full, and you haven’t closed that account, make sure to review a detailed copy of your credit report.
The first scenario shared is more common though. To avoid this, after you pay the balance in full do not close that line of credit. Instead, you can cut up that credit card and delete the information from your Google, Apple, Venmo, PayPal, and other digital wallets.
If you do cease using a credit card after paying its balance in full, make sure you still pay any annual fees associated with the account. Depending on the length of time you have had that card, other lines of credit, and your overall credit score, you may want to close that card anyway so you no longer owe those annual fees.
How Much Should I Pay On My Credit Card to Increase My Score?
In the long run, it’s always best to pay your credit card balances in full so you can avoid paying any interest.
If that’s not possible, aim to keep your total credit card balance at 30% or less of your total credit limit. Investopedia suggests that keeping your balance at 10% of your credit limit can be ideal for raising your score.
Is It Possible to Increase My Credit Score by 100 Points Within 30 Days?
Lending Tree suggests that there are many things you can do to dramatically improve your credit score within 30 days — possibly seeing a 100-point jump.
- Pay down your credit card balances to bring your utilization ratio down to 30% or lower.
- Apply for an increase in your line of credit on one of your cards. If this brings your credit utilization ratio to 30% or lower, you can see a substantial score increase. If it does not, your credit score may temporarily dip by up to 10 points.
- Apply for and receive a new credit card. As in the above example, this will help your score if it lowers your credit utilization ratio to no greater than 30%, but this may temporarily lower it by up to 10 points as a hard credit pull has just been made.
- Request late payment forgiveness. If you’re one or two days late, it won’t matter. Creditors will not report a late payment until 30 days or a full billing cycle has passed. But if you are reported late, it can stay on your credit report for up to seven years and dramatically drop your score. If you’ve been a solid customer and just missed one payment, contact your lender and ask them for forgiveness. This can also reverse related fees and interest charges. Given how catastrophic even one late payment is for your credit, getting it forgiven could improve your score by 90 to 110 points.
- Improve your Experian score by adding phone, utility, and streaming service bills to your credit history. The Experian Boost service lets credit builders add recurring charges that are not typically reported to credit bureaus, like rent, gym membership, utilities, and streaming services. Generally, these bills would only be reported if you defaulted, but you can sign up for this program to build positive credit. It could raise your Experian score by 8 to 12 points within 30 days but will have no impact on TransUnion, Equifax, or other credit scoring models.
- Dispute any negative, inaccurate information on your credit report. This could quickly increase your credit score by 100 points or more, depending on the errors you find and how long it takes the bureaus to correct them. If there is one instance of a creditor inaccurately reporting your middle initial, correcting this won’t improve your score since it wasn’t harming it. But if you identify inaccurately reported late payments or delinquent lines of credit fraudulently opened in your name, this will have a dramatic and immediate impact.
What Are Some Other Ways I Can Improve My Credit Score?
In addition to paying off your credit card in full, there are other ways you can improve your overall credit score.
- Stay on top of your personal finances with free budgeting apps and credit card spend trackers.
- Obtain your free credit report every year from the three major credit bureaus. Similarly, most credit cards and banking institutions will show you your free credit score every month.
- A debt management program can help if you have bad credit and a checkered history. These programs can help you right-track your finances and see major gains over time.
- Consolidating your credit card bills—with a debt consolidation loan or a 0% balance transfer credit card—may improve your score.
- Consider using a credit monitoring service — they can catch any errors or potential threats early and resolve them quickly. This is more preventative maintenance than an immediate score lifter — unless, of course, you’re engaging an agency to resolve specific negative issues on your behalf.
- A secured credit card (which requires an upfront deposit) can help you build a history of on-time payments.
- Get a side hustle. While your income doesn’t impact your credit score, it does impact your ability to build a safety cushion and offers extra assurance you’ll be able to pay your bills on time every month.
Paying off your credit card in full will help you improve your credit score (by up to 10 points), or maintain your existing good credit.
And while you can try and strike the perfect credit utilization ratio — and pull other levers — to eke out the highest possible score, your best bet is to just focus on paying your bills on time, in full, every single month.
With every credit score different — we can’t definitively tell you how much your score may change by paying your balance in full — but we’ve armed you with some solid information. You should have a good understanding of what actions may impact your credit score, and by potentially how many points.