How Long Does It Take For Credit Score To Update After Paying Off Debt?

If you live in the United States, you know how important it is to maintain a good credit score. Having a good credit score is essential to everything from financing a car to buying a home. So, if you have just finished paying off your debt, how long does it take for your credit score to update? We will discuss the answer to this question in much detail below.

How Long Does It Take for Credit Score to Update After Paying Off Debt?

It takes approximately 30 to 60 days from the date you paid off your debt for your credit score to update. Your credit score may update earlier, depending on when your lender updates your account status with credit reporting bureaus, such as Experian, Transunion, and Equifax. Lenders usually update your account status on a monthly basis. So, rest assured, if you have paid down your debt, it will be reflected in your credit report within a short period of time. Once your credit report is updated, so will your credit score.

So, if you though that your credit score will be updated immediately after paying off your debt, you’re mistaken. You could pay off your credit card or loan and immediately check your credit report, and you’ll be sad to see that neither your credit report, nor your credit score will reflect the payment.

However, if you wait a month or two and check your credit report, you may see that your lender has updated the information with the credit reporting bureaus and your credit score has increased. As a rule of thumb, you should allow at least 2 billing cycles to pass before the information is updated on your credit report.

You should always strive to pay off your debt because doing so will improve your credit score for two reasons. Your payment history accounts for 35% of your credit score, so making payments in full on time will improve your credit score because it shows that you’re responsibly borrowing money and repaying it on time.

Also, paying off your debt decreases your credit utilization, meaning the amount of debt that you owe when compared to your credit limit. For example, if you have a $10,000 credit limit and you’re using $5,000 of your available credit, your credit utilization is at 50%. Paying off your debt will free up some of your available credit, decreasing your credit utilization. A decrease in credit utilization will improve your credit score.

Why Should You Pay Off Your Debt and Improve Your Credit Score?

You should pay off your debt and improve your credit score because maintaining a good credit score is essential for the following reasons:

  • Better interest rates on credit cards and loans
  • Better chance for being approved for a credit card or loan
  • Ability to obtain higher credit card limits
  • Ability to borrow larger amounts of money
  • Ability to avoid security deposits on utility accounts
  • More favorable loan terms
  • Lower auto insurance rates
  • Better ability to secure employment

As you can tell by now, having a good credit score has the ability to impact various aspects of your life. So, if you have high credit card balances, paying off your debt will help you improve your credit score. The fact that it takes 30 to 60 days for your credit report to reflect the changes should not keep you from paying off your debt and improving your credit score.

How Often is Your Credit Score Updated?

Your credit score is updated and calculated very time you check your own credit report. The credit reporting bureaus use the information in your credit report to calculate a credit score for you. Your creditors and lenders report the status of your account to the credit reporting once every 30 to 45 days. Whenever the information is updated in your credit report, your credit report tends to change based on the new information.

The information that is reported by your lender or creditor to the credit reporting agencies includes information, such as your payments or lack thereof, changes in your account balance, the outstanding debt that you have, new credit or loan application, and other derogatory information. Whenever a creditor or lender reports new information, your credit score tends to change. You can pull your credit report at 7:00am and against at 5:00pm and you may notice a change in your credit score if new information was reported to the credit reporting bureaus.

Whether your credit score has changed depends on the number of accounts that you have, whether the status of your existing accounts has changed, and whether you have applied for new credit.

How Much Will Your Credit Score Increase After Paying Off Credit Card Debt?

The answer to this question will be different from one person to another. The answer depends on how much of your credit you’re utilizing. For example, a person who is utilizing 80% of his available credit and pay is down to 20% will see a more significant increase in his credit score than someone who is utilizing 35% of his available credit and pays down his credit card so that he’s utilizing 20% of his available credit.

Some persons who have paid down their account balances have seen a credit score increase of 10 to 90 points, depending on how much they decreased their credit card balances by.

Credit utilization accounts for 30% of your credit score. So, paying off credit card debt will definitely cause an increase in your credit score. However, the number of points your credit score goes up depends on how much of your credit card debt you’ve paid off and other information in your credit report.

Although credit utilization accounts for 30% of your credit score and should not be ignored, the most important factor that impacts your credit score is your payment history. In addition to paying off debt, you should ensure that you’re making payments on your credit cards and loans on time.

Missing even one payment can have a devastating impact on your credit score that lasts up to seven years. So, pay down your debt, but make sure that you have enough money to comfortably keep making payments on your accounts.

What Other Factors Influence Your Credit Score?

Here are all of the factors that influence your credit score:

  • Your History of Making Payments – 35%
  • Amount of Credit You’re Utilizing – 30%
  • The length of your credit history– 15%
  • The amount of new credit that you have – 10%
  • Your mix of credit – 10%

This should tell you that making your payments on time and keeping the amount of money that you owe to a minimum are the two most influential factors on your credit score. So, make sure to always pay on time, and only spend what you can afford to pay off at the end of the month and you should have a healthy credit score.

Credit Score Planet Frequently Asked Questions

1) Why did my credit score drop after paying off debt?

If you’ve paid off your credit card, your credit score is unlikely to go down as a result. If your score does go down, something else might be causing your credit score to go down, such as an application for new credit. That said, if you have just paid off an installment loan, such as a car loan or home loan, your credit score could drop as a result because closing an account by paying it off reduces your credit mix, which could cause a temporary drop in your credit score.

2) What day of the month does your credit score update?

Your credit score can change multiple times a day. Credit scores update at different times depending on when your lenders and creditors update your account status with the credit reporting agencies. This is different from one lender to another, so it’s difficult to say exactly when your credit score will update.

3) Does paying off all of your debt increase your credit score?

Paying off all your debt does have the potential to significantly increase your credit score.

4) Is it better to pay off your credit card or keep a balance?

Paying off debt is always better than keeping a balance. Creditors and lenders like to see people who borrow money and repay that money on time. So, if you have the ability to comfortably pay off your debt, you should as this will only help your credit score since you’ll be seen as someone who borrows as much as he can afford to pay off at the end of every month.

How Long It Takes for Your Credit Score to Update After Paying Off Debt?

Usually, it takes 30 to 60 days for your credit score to update. However, you may see your credit score update earlier or later, depending on when lenders and creditors update your credit report. That said, rest assured, if you have paid off your debt, eventually your credit report and credit score will be updated to reflect your payment.