During these times of financial uncertainty, people are getting more and more concerned about securing their financial future. This includes maintaining a good credit card score in order to save money on interest rates.
One of the most effective ways to grow your credit score is to pay off your credit accounts. When you pay off a credit account, your lender will update their records, and that will then be reported to Experian, TransUnion, et al.
Once this is visible on your report, you can order a new credit score report to find out how it was affected.
Here are some ways in which different credit accounts affect credit scores.
Paying Off A Collection Account
In case the account you are paying off is a past due collection account, there’s a high chance that you won’t see any sudden difference in your credit score. Any changes or increases will depend on what scoring model your credit history is based on.
There are a few scoring models that exclude collection accounts once they have been paid off. In these cases, you might experience an increase in your score as soon as your account is reported as paid.
Paying Off Your Credit Card Account
If you want to see a quick increase in your credit score, a great idea is to pay off your credit card balance.
This will keep your utilization rate in check, as this is the second most important factor that comes into play when trying to achieve and maintain a high credit score.
Paying Off Your Installment Loans
Paying off installment loans will actually cause an immediate dip in your credit score because by paying them off, you’re essentially closing that account. However, this dip is accounted for and well worth the pain because it’s temporary and bounces up in a couple of months.
If you’ve tried all these methods, but you still haven’t seen a difference in your credit score, maybe it’s time to contact a professional credit repair service. Our credit repair consulting experts work very closely with our clients to better understand their problems and design custom solutions for them.