Asked by Julio  |  Submitted July 10, 2019

If I pay off the remaining balance on my credit card will my credit score go up or stay the same?

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  Answers  |  1

July 12, 2019

Paying off your credit card balance may raise your credit score by lowering your credit utilization. Your credit card usage impacts your credit score in two ways - through your monthly payments and your credit utilization.
The most important factor influencing your credit score is making on-time payments. If you miss even a single credit card payment, or pay it late, your credit score could take a serious knock.
The next most important factor is your credit utilization, which refers to how much of your available credit you've used. Experts recommend you keep your utilization below 30%. For example, if the limit on your credit card is $10,000, you should keep your balance below $3,000. This 30% utilization rate is a maximum, but some research suggests that people with the best credit scores have even lower utilization ratios of 10% or less.

Once you have paid off your credit card, don't stop using it altogether. Keep charging small expenses that you can afford to pay off again at the end of the month. That will keep your credit card account open, showing that you can responsibly handle revolving credit. As long as you keep paying off the balance each month, you won't have to pay interest on your charges.

To improve your credit score, ensure that you make at least the minimum payments on all your credit cards before the due dates every month. Also try to make sure that at any given moment you carry less than 30% of your limit on each card. The good news is that recent information should carry more weight than your past mistakes in calculating your credit score.

For personalised tips on how to raise your credit score, sign into your MoneyTips account. You can also download our free eBook, Give Yourself Credit, for more practical advice.

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