The Do’s and Don’ts of Closing Old Accounts

The Do’s and Don’ts of Closing Old Accounts

Closing old and unused credit accounts on your credit reports can help you avoid unnecessary fees and guard against identity theft. However, it can also cause your credit score to drop if you are not careful. Here are a few do's and don'ts for closing those dormant accounts:

Do...

  • Consider closing unused and idle accounts. These accounts could be charging you unnecessary fees and are often targets for identity thieves. If you decide to close one or more accounts, consider closing the accounts with annual fees or the highest interest rates first.
  • Check your credit reports online to see the status of your accounts. Look out for late payments, high balances and signs of identity theft. Additionally, checking your credit report could save you time by providing you with contact information for each of your creditors.
  • Be aware that you can usually cancel accounts that have an active balance by asking your creditor to close the account to new charges and continuing to pay down the balance each month. This may be a good way for heavy credit users to prevent new spending while they are reducing their balances. However, watch out for additional fees.
  • Aim to keep four to six credit accounts open. This is generally recommended to keep your credit score and debt balances healthy. Signs of active and responsible credit use are viewed positively by creditors.
  • Designate one card for regular use and try to pay the balance in full each month. Think about reserving the other cards for emergencies only so that you are not tempted to overspend.
  • Remember to check your credit reports for updates and errors after you close your credit accounts. You should generally wait 30 to 60 days for the creditor and the credit reporting agencies to update your records. While the accounts and their payment histories may stay on your report for seven or more years, the status should be updated to reflect that they are closed.


Don't...

  • Close the oldest account on your credit reports. This could cause your credit history to appear shorter, which may harm your credit score.
  • Just throw away old cards and expect your accounts to close automatically. The safest way to close an account is to send a certified letter to the customer service department of the creditor. Typically, you should receive an account closing confirmation letter in 10 days.
  • Be pressured to cancel several accounts all at once. Gradually paying down and closing accounts may be the best plan if you are unsure about the impact on your credit score or the amount of debt you need to carry. If you want to cancel numerous credit accounts, spacing the closures over time could reduce the chance of attracting negative suspicion from potential creditors.
  • Over-consolidate balances onto one card. As a rule of thumb, if your credit balances rise to above 30 percent of your available limits, you may see a drop in your credit score.

If you have any more questions, head over to our forums, where you can ask other Credit Karma members about various financial topics. When you're ready to apply, find the best credit card for you.

Editorial Note: The editorial content on this site is not provided by the bank or issuer. Opinions expressed here are author's alone, not those of the bank or issuer, and have not been reviewed, approved or otherwise endorsed by the bank or issuer. Credit Karma may be compensated by companies mentioned through advertising, affiliate programs or otherwise. It is this compensation that enables Credit Karma to provide its members with services like free access to your credit scores and free monitoring of credit and financial accounts at no charge.

 

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

All Comments

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1 Contribution
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Helpful to 1704 out of 1804 people

I paid off my car loan that I had with Wells Fargo. After that was paid off, the account was reported as closed. My credit score went from a 765 to 743 because of this. I do not think it is right that if you pay off a car loan that you should be penalized if that account is closed. It should be that you get better credit when you pay off a loan. I even paid the loan off early. One should be rewarded for dealing with credit appropriately.

Reply by
huseofrio

1 Contribution
436 People Helped
Helpful to 436 out of 465 people

That should bea reporting error. They are supposd to say  paid in full...

Reply by
holdem769

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762 People Helped
Helpful to 762 out of 814 people

Similar thing happened to me. I paid off a loan for some furniture in Nov and a student loan in Dec. The furniture was one of those 0% deals for 18ths the student loan came out of deferment in Feb. For both loans I paid extra each month, paid every payment on time or early, paced it so that it took about a year to pay off each, and the account just automatically closed once they were paid in full. However, I checked my score today, to my surprise, it dropped! I have had no inquiries, no new accounts, no late payments, just a reduction in total debt, I'm listed as having great activity, and it shows the accounts closed themselves. This is the stupidest thing I have ever seen. Scores should increase by paying extra and early, as long as you keep activity, but the opposite seems true.

Reply by
preciousjade

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0 People Helped

I totally agree with lynnh3 with regards to auto loans. What I don't understand is that I was in the same situation ( paid off my auto loan 1 1/2yr early) However, my credit score increased by 35 points.

Reply by
WLTHYlady

3 Contributions
0 People Helped

My daughter's credit score was decreased by 15 points after she paid off her car loan early as well.  I totally agree you should be rewarded for managing your credit appropriately and paying loans off early.   

Reply by
telle33

1 Contribution
10 People Helped
Helpful to 10 out of 12 people

I just closed my last credit card account (I had 3 of them) and my credit score went from 757 to 722...are you kidding me?!? Not happy right now.

Reply by
DieSonne777

2 Contributions
13 People Helped

well, agree with you lynnh3! A part of it is that the types of credit play a role in the overall credit calculation process. So, while you still might have a mortgage and credit cards, this type of debt is gone and that's what hurt your score. I hate the fact that everyone must owe something to be in a good standing.

Reply by
annabellemn

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0 People Helped

This just happened to me too! I paid off my car loan, and my credit score went down 14 points!  I agree that it should reflect positively, rather than negatively, because it meant we dealt with credit well! Ugh. Just another step behind on the journey of increasing my credit score.

Reply by
xwarren

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9 People Helped
Helpful to 9 out of 11 people

I too just paid off a car loan early and my score went down by 7 points this really stinks.

Reply by
carriegeneane

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0 People Helped

I too just paid off my car loan with Wells Fargo and my score dropped.  This has to be an error I will fight this with on all 3 credit reports.

Reply by
yolanda1420

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0 People Helped

i was going to ask the same thing, i just paid my car off three week s ago and paid 4000.00 i looked at my score and it dropped 11 points, i dont undestand why it was lowered, i also though that it would have went up. i need answers 

Reply by
Barron13

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0 People Helped

I complete agree with this. I did the same exact thing and my score dropped 9 points. Why am I penalized for doing a good thing?

Reply by
teliamarie

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0 People Helped

I had the same thing happen to me and couldn't believe it my score dropped 18 points after paying off my car and I also paid it 2years early it shows as closed this is not right or fair to us . 

Reply by
durango329

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0 People Helped

I just paid off my student loan early and then my credit score dropped 13 pts. I don't understand why they punish responsible people.

Reply by
Maradona17rj

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0 People Helped

I completely AGREE! I paid off my $40,000 car, I'm still in school & my credit report score dropped 30 points when the account with capital one got recently closed. That's not fair. 

Reply by
humorous2me

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0 People Helped

I feel your pain. I just paid off my car loan a year early. Score before 753, score after 688. Nice reward for being responsible.

Reply by
cmaeham

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29 People Helped
Helpful to 29 out of 30 people

I agree, I paid off two car loans and a mortgage and it dropped me 25 points, that bullcrap

Reply by
jewelzdevone

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7 People Helped
Helpful to 7 out of 8 people

agreed.

Reply by
stacysdad

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0 People Helped

I agree with you,i just had the same sort of thing happen to me,in mycase it was a credit card that i closed becaue i never used it,the orginal thought was to have a credit card  just incase of unforeseen emergency,well that didn't happen thankfully and i closed the card out,my score went from 749 to 703 because i thoght i was doing the right thing for me and my bank.

Oh well what can you do,oh i know i can go out get a credit card,use it and go deeper debt,that will do it!!. 

Reply by
mocuz

3 Contributions
2 People Helped

I paid off mu car as well and it made my credit score go down as well. Why does it say closed when it should say paid in full?

Reply by
Tjshadow

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0 People Helped

Actually I feel the pain I just did the same thing and they dropped my score by 15 points

Reply by
wolfemancs

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0 People Helped

think about it from the banks point of view.  If you pay it off early, then they don't get as much interest. 

Their FAVORITE type of creditor is one that always makes the payments, but also who pays the most interest while making their payments. . . so more accounts open, and not 0 utilization.

Credit score really is all about how reliable you are to make the banks money.

Reply by
TonyFf

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0 People Helped

Ork with your senator to enact laws that  track and report your credit fairly. I agree if you pay off a loan your score should go up.

Reply by
bdj2

5 Contributions
5 People Helped

The thing to remember when dealing with credit is the "Credit System".

The "Credit System" system is not set up to be beneficial to you.  It is set up to benefit the lenders.  If your confused, it helps them.  If you pay off a loan early, thus taking away interest that would be paid to them, it helps you and penalizes them.  

The "Credit System" is about how they can make more money from you.  Leave common sense out of it.  Sucks, but it is how it is.  This is why we share information in an effort to game the crooked and corupt  "Credit System".  Fair has nothing to do with it.

Reply by
B3nDc0x

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0 People Helped

Well does it count in a good way if it got paid off from insurance yes an unfortunate event

Reply by
Puglife13

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0 People Helped

Is there anything we can do to fix it? I paid off my car loan last month and I checked my credit score today and it dropped 13 points!  Same deal. I made all payments timely and my overall debt has been reduced  but my credit score dropped. That makes no sense. 

Reply by
spazitude80

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0 People Helped

if you pay off something thats old doesn't it become a new debt or something like that?

Reply by
Bcharles85

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0 People Helped

I paid 2 cars off and 1 installment also purchased a new vehicle. My credit score dropped 55 points right when I'm ready to buy a second vacation home! Can't win for losing in our new society!!!

Reply by
yorx54

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0 People Helped

I had 764 and just because of closing my oldest credit card account with $300limit, my credit score has dropped to 706.... Instead being reward for making payments on time and being responsible, they just penalize you as much as they can.. *******s!

Reply by
Ddyrich

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0 People Helped

Agree it has to be dumbass liberals who came up with this credit crap. It makes no sense what's so ever.  

Reply by
crmontoya

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0 People Helped

I agree same thing happened to me.

Reply by
MLCequest

1 Contribution
0 People Helped

I have been working hard at keeping my payments on time rebuilding my credit score because I had to file bankruptcy a few years ago, I just paid off my auto loan through Capital One, which was $10,000 and now it says my score dropped 29!!!!! So now my rating has gone from fair to poor. That is such BS!! It should have gone UP 29 points, not down. I'm just so sick right now.. how can you be penalized for paying things off early? 

Reply by
kflannery

1 Contribution
0 People Helped

Think about the real estate boom of the last decade.  When people "refinanced" it looked like their old loan was paid off in full.   Paying off an account for real looks similar.  

Reply by
sgtrock314

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0 People Helped

People, it's their Game and their Rules. Learn the rules and play the game. Remember the Golden Rule,he who has the gold rules.

Reply by
D5389

1 Contribution
0 People Helped

I totally agree with you.

The whole credit system in America is jacked up.

You get dinged for EVERYTHING. It's always a lose lose situation.

Totally absurd and we as consumers need to take back the market and do it the way we want it done!

Reply by
vanscoyoc

2 Contributions
0 People Helped

You are punished for that because they don't wanbt you debt free, they want you to be a debt slave and great servent and pay them interest.  You escaped the debt plantation and they don't like that and thus your credit rating was reduced.  It's expected you will go hog wild crazy off the debt plantation.  See how it works, now?  You aren't a good slave by not replacing your previous loan with a new one to enrich the slave masters.  Get it?

Reply by
itsmeleec

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0 People Helped

Absolutely Agreed!
 

Reply by
ts52493

1 Contribution
0 People Helped

I agree with you on this statement I also paid off a student loan early and my credit score plumeted also.

Reply by
notsotinytim

2 Contributions
0 People Helped

They don't give a **** about your credit score.  I paid mine off this past January and my score dropped 12 points.  They just sit there and play God with peoples lives.

Reply by
okiegene

2 Contributions
0 People Helped

I agree. I think the less you owe the better your score should be. If you pay as you go, you should be rewarded.

Reply by
Ldo1999

1 Contribution
0 People Helped

Same thing just occured with me. I knew about closing credit cards but Auto loans should not be considered the same way -- afterall eventually the car must be paid off. I took a hit of 9pts for paying off my car 2.5 years early. Go figure. What a racket.

Reply by
Schlimer

2 Contributions
0 People Helped

I had a credit Card account with HDBC , I paid my bills in full each month, after year and a half, they sent me a lett stating that my account was closed.

Obiviously they did not like that I was using their money all month and paying it in full; in year and a half I was with them they have not made a penny from me.....

Reply by
honestyplease2

1 Contribution
4 People Helped
Helpful to 4 out of 5 people

So True!!! That same thing happened to me. I thought the early pay off of my car loan would raise my score. However, my score dropped 6 points. This is totally unfair!!!

Reply by
tacovisa11

2 Contributions
0 People Helped

This also happened to us with a newly paid off line of credit through our credit union. We paid it off and they reported it closed.  :(  Only cost us 2 pts but still, they don't care what they do to your credit. They just report it the way they want to. 

Reply by
Fugie314

1 Contribution
0 People Helped

I had the same problem when I paid off my car did u find anything out about it cause I would like to know what to do also 

Reply by
CUCHYCUCHY

1 Contribution
0 People Helped

That is exactly my situation. Yes..  I also pay off my can loan ( WELLS FARGO )  early and my points droped big time.

Reply by
su74

1 Contribution
1 Person Helped
Helpful to 1 out of 1 people

I agree the same thing just happened to me I traded in for a brand new car and when my old loan was paid off by the dealership it dropped my score like 22 points that's just not right

Reply by
dev06

1 Contribution
1 Person Helped
Helpful to 1 out of 1 people

I just did exactly the same thing (paid off a car loan early) and my credit score dropped from 701 to 697.  That's not right and not fair!  Is there anything we can do about it?

Reply by
Qwert12344321

1 Contribution
1 Person Helped
Helpful to 1 out of 1 people

Yeah, I have a discover card that gives you your actual fico credit score on your monthly statement. Typically, your fico score is actually 30-50 pts higher than your "fako" score credit karma gives you. But nonethess I still use it because it does a pretty good job at displaying your accounts and what all you have. Anyways, my actual fico score (getting these numbers on my discover statement) was 844 and after I paid off my auto loan a year and a half early, it dropped to 756. I was so mad. All my hard work to just drop my credit score nearly 90 pts. This system is seriously flawed. Am absolute shame. 

Reply by
Acill

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1 Person Helped
Helpful to 1 out of 1 people

I just sold one of my two homes (the 2nd being a rental I was tired of dealing with in another state) I paid off both cars and all the debt I had with some of the return we got from that house getting sold, and put a ton into savings. Suprprise surprise, my score went from a 760 down to a 748 this month.

Really? What a scam!

Reply by
mdcarver

5 Contributions
128 People Helped

I totally agree.

Reply by
vemg2016

1 Contribution
1 Person Helped
Helpful to 1 out of 1 people

I paid off my car this year back in January and they still have me as having a balance and saying my account is closed. I guess things still haven't changed in 2 years.

Reply by
meldor1

1 Contribution
2 People Helped
Helpful to 2 out of 2 people

I paid off a car loan I had as well. It was my oldest account. It dropped my score 91 points!!! That's the ONLY change to my credit. I can't believe that I have worked so hard to build my credit and keep it top notch only to be penalized for paying off my vehicle loan! Credit ratings (and the way they are set up) are designed to keep a person in debt. The hell with that. I would rather have a low credit rating and be debt free than have the best rating and be swamped with debt.

Reply by
Newyorkgnt10

1 Contribution
0 People Helped

I've had a previous auto loan with

wells Fargo and paid it of after approx 

ten months or so I was never late on 

a payment and it took them over two

months to take it off my credit and

 marked me late on payments two 

months and then finally they took it off

my credit but instead of putting it as

paid in full they just put it as a closed

account so that hurt my credit instead 

of it helping it buy putting it as paid in 

full.is there something I can do to get

this fixed so it shows paid in full ?

Reply by
osprey112897

1 Contribution
2 People Helped
Helpful to 2 out of 2 people

I agree. Same thing happened to me. Paid of my car loan 2 years early and it's reported as closed and now my credit rating went from A to B.  That's ridiculous.  

Reply by
upsetwithcarma

1 Contribution
2 People Helped
Helpful to 2 out of 2 people

I also paid off a car loan, but with USAA. My score went from 760 to 743. This is a rediculess way to do scores. Should be illigal.

Reply by
Kj4402

1 Contribution
0 People Helped

I agree. Same situation

Reply by
Rb829

1 Contribution
0 People Helped

Here's one guys..... My mortgage was transferred to a different lender... It was reported as closed my credit score dropped 10 points... Can this be fixed

Reply by
jennhihi

1 Contribution
2 People Helped
Helpful to 2 out of 2 people

Same thing happened to me. I just paid off my 72 month car loan this past May 2014 and my credit score went down 30 pts  this June. So friggin ****ed off because I was so excited to truly own my car and thought I get a boost in my score. But NOOOOOO, the system screws again. Some may not this, but this could hinder in me getting jobs, especially with financial institutions. It shows you're not good/reliable with your finances then how could you be trusted with others.

Reply by
mdcarver

5 Contributions
128 People Helped
Helpful to 1 out of 1 people

i so agree.

Reply by
marcautodixon

3 Contributions
16 People Helped
Helpful to 1 out of 1 people

Same thing with me! I was so excited to have paid off my truck a year early...as soon as it was reported as closed account...my credit score reduced! I was so disappointed...I just paid off a personal loan last week....2 years early! It's been reported as closed account BUT this time credit score jump a lot! Just paid off majority of credit cards and some are paid down to half balance...can't wait to see where my score will be at! Excited now...hope not disappointed later...

1 Contribution
2 People Helped
Helpful to 2 out of 2 people

I had the same thing happen to me this month. I paid off a $20,000 personal loan 18 months early and the company closed my account. The result was my TransUnion score actually went down 13 points. I expected that someone who did what we did would be rewarded with a higher score not penalized for being responsible. My FICO score actually went up! I am beginning to believe this whole TransUnion credit score thing is a scam. 

Reply by
peda123

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0 People Helped

we consolisated a lot of bills & pd. them off. but doesn't even show on credit report.

Reply by
gwzundell426

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0 People Helped

Yeah, what is that all about?

Reply by
djbarnard55

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0 People Helped

I paid off my car after a bankruptcy 13 and it didn't even show that I paid all my monthly payments.  Don't know how to fix this?

Reply by
whoami24

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0 People Helped

Exactly

Reply by
tstil7

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2 People Helped
Helpful to 2 out of 2 people

similar thing just happened to me - I paid off a credit card and closed the account - my score then went down 27 points. I paid off the card - why am I being penilized for this???

Reply by
17dad

2 Contributions
0 People Helped

i think you are exactly right, but i have not heard an answer back? Dave

Reply by
PToye

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0 People Helped

The same happened to me in 2013... (-_-)

Reply by
gwen12

4 Contributions
64 People Helped
Helpful to 2 out of 2 people

I agree with you totally.  I've paid off several credit cards but are afraid to close them for fear of my score dropping.  I'm forced every month to view the open accounts for fraudulant activitiy.  This credit score mess is just trickey; you **** if you do and **** if you don't.  

Reply by
Peaches271982

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Helpful to 2 out of 2 people

I traded my car in and they reported me late wich I was never late and I fought it and they fixed it

Reply by
randyw3488

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Helpful to 2 out of 2 people

The same freaking thing happen to me.  I paid off my car loan and my credit score has dropped 6 points without anything else changing.  That is so unfair.

****ed

Reply by
bigoreo31

5 Contributions
33 People Helped

Goes to show you that FICA Scores are a JOKE !!! When you Pay Off debts , your FICA Score should go up !!! It shows that you have the ability to pay off debts that you have incurred . Especially if you have paid ALL of your Payments on time !!!

Reply by
arplane

3 Contributions
0 People Helped

     This is the trend America has gone. Big government, big financial institutions. Everything starts at the top. Big institutions like Fannie Mae, Frddy Mac are bailed out by who? The government. Why? Election contributions. Who pays for it? We do. Us, who are the TRUE AMERICANS. We're not in it for the power of control. but in it for survival. The true appocolips will be our own government. Greed and power has succummed. They have become the modern day Nazi's of the 21's century. Not with bullets, but our pocket books. Time to take back government. CAN THEM ALL!!!!!!!

Reply by
kviernes

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0 People Helped

 I  to closed my paid off credit debt. I went from 641 to 618 in a month.

Reply by
feliciam7

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0 People Helped

The same thing  happened to me , I thought that paying off a car loan would boost my credit score but instead it dropped 6 points. I feel exactly like you Ifelt penalized instead off rewarded for paying down my debts.

Reply by
windy2222

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0 People Helped

i agree i have a few that i paid off & no late payments &mine went down

Reply by
azsafetyman

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0 People Helped

same thing happened too me as well lost 40 pts for paying off a car loan, this tells me that credit scores are only for the financial Institutions not for the consumer. I totally agree with you 

Reply by
Lauhay123

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0 People Helped

I totally agree!! The same thing happened to my husband when we paid our RV off in full. We paid the $17k to the bank and my husbands score dropped 20 points. 

This whole credit score thing is ridiculous :(

Reply by
fedup2014

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0 People Helped

This whole credit rating system is a scam to swindle people and its sanctioned by congress. How worse can it be?

Bankers, insurers, real estate, salesmen of all categories are schemers and work contrary to the ideals of ethics and morality, but then again, the world is becoming greedier and greedier and politicians let it get out of control as their bank accounts benefit.

Reply by
Darkfae4

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0 People Helped

I agree I didn't ask for my account to be closed , they closed it on their own. 

Reply by
DRRUSH

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0 People Helped

This just happened to us as well.  We paid off our 5 year car loan and our credit score went down.  Crazy the way the world rate you, it seems they always want you in debt.

Reply by
Allerton69

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0 People Helped

The credit scoring system is designed to benefit credit card companies. If I have close a credit card or account because it offers bad terms or no longer use it or that company treated me poorly, why should it matter to my credit.  Although I now have Excellent credit, when Amex ****ed me off, I closed all my accounts and vowed to not do business with them again, my right as a consumer, despite being my oldest accounts. What we need is a Consumer Credit Union and fair credit scoring programs not slanted to the companies getting zero percent loans from the American people/government and then charging 15%+ interest to the very people who bailed them out when they were insolvent!

Reply by
Nickyryvers

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0 People Helped

The same thing just happened to me. Wells Fargo! My score just dropped 10 points. I couldn't believe this was why. Until I read your comment. I'm ****ed! I thought for sure I would get a 10point jump!

Reply by
jclarke531

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That just happened to me.  I paid off a personal loan and two car loans and my score dropped from a 780 down to 743.  SMH!  For short term loans they should not be considered as revolving credit like a credit card.  They are not the same, so why are they counted the same in the credit scoring.  What a game!

Reply by
parbuster69

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I    A G R E E  !!!!!!!!!!

Reply by
ArtisticB

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Samething happened to me... after paying off the car loan, my credit score went down 7 points... FRUSTRATING!

Reply by
Joepbso

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I agree. I paid off my var and also closed several credit cards due the company being hacked into. To protect myself I closed he cards and my vredit dropped.  What's that all about. It should be better

Reply by
lisaconrad

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i paid off my husbands truck 2 years ago and it shows up as a charge off  this has hurt us!!  what and how do i go about getting this fixed

Reply by
BC1967

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That's EXACTLY what happened to me when I paid off my student loans!  I have been paying, on time, for YEARS!  Finally get it paid off and I am penalized for doing so!  It should not be considered a "closed account"!!!!!  My credit score dropped 60 points!  If anyone has any idea how to correct this, any feedback would be greatly appreciated!  I worked hard to pay off that loan! 

Reply by
VULTURETEARS

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You are right 100%

Reply by
robnrich

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0 People Helped

Listen to what Wells Fargo did to us!!! It randomly decided that they needed to change our account number on our auto loan, hence creating a closed account, resulting in a 60 POINT drop in credit score. Can you say "niiiiiiice"

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Just remember one thing... To get in debt, you have to be in debt.....lol

Reply by
scorpion1963

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I totally agree with you. But if you pay off accounts prematurely they penalize you because the creditor did not make the contracted money off you. Just corporate America screwing over the little people.

Reply by
100139

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Would not try to associate my self worth with the means that some invisible entity uses to quantify a "credit score." It is designed by the people with money to keep the young and the working class within their means.

Reply by
RevRic48

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I paid off my car and score dropped 32 points. Took me three yaers to come back up. Crazy!!

Reply by
sm739

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Sounds like more credit scams...I reconsolidated students loans and my score dropped a lot, 30 some points! Sick. 

Reply by
damnit1

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AGREED!

Reply by
thinkglobal83

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Paid off two school loans because I was tired of getting raped in interest and almost closed a 3 before I realized they were my oldest credit lines and closing two of them shortned my credit history by 3 years. Took my score down over 20 points. The rig the system so you always lose. That's the bottom line. 

Reply by
tnvolsfan1113

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I had the same thing just happen with my Toyota car paid off so account is closed Should not be counted against us. It should improve our score. 

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Lowering a score when an account is automatically closed when the debt is paid for (i.e. mortgage, auto loan) is a freaking scam.  It's just another excuse that financial institutions can use to increase your APR's so they continue to get gobs of money for absolutely no reason at all. 

I shouldn't have to pay more for my next house because I just paid off my $300,000 mortgage in 10 years.  Obviously I was extremely responsible in making my payments, so I should not be penalized for being so responsible. 

Oh, and for those of you who want to argue and say that credit scores aren't meant for determining payment responsibility, I have a quote that came directly from my Trans Union credit report that was received from myFico.com. 

The quote says "The reason consumers with good FICO scores get better interest rates is because they pose less risk of missing payments or defaulting on a loan.".

Hmmmmmmmmmmmmmmmmmmmmmmmmmmm, I wonder how I pose a higher risk this month (after paying off my mortgage 20 years early) than I did last month?  Nothing else changed on my report, except my mortgage has been marked as $0 balance and closed.

This credit scoring system we have, my friends, is the largest scam in the history of mankind. 

Reply by
platypus1555

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I agree 100% as the same thing just happened to me after paying off a 40K car with perfect pymt history never a late and they close the account - I take the hit on my score, now......THIS EFFIN SUX!!!

Reply by
juanca1234

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i agree with you 1000% we are living in a huge BIG scam,in almost every aspect of our lifes,''SAD''

Reply by
Rayenna

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I just dropped 25 points for paying off my mortgage, and my length of credit history has a "D" rating because I closed several unused cards out of fear of identity theft.  I have paid off several home and equity loans over the years, and no credit is given for that!  I don't want to keep anything open that I'm not using because I don't want to be forced to keep monitoring for activity.  This is a total scam and it's disgusting that they penalize you for trying to be responsible.  The object here seems to be reward you for entering into debt, making them money on finance charges, and make you keep paying for identity theft services and copies of your own credit report.  

Reply by
sanady23

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I agree,  but what can we do?  I contacted the new Consumer Protection Agency about a problem.  They acted pretty quickly and I got an answer to my issue.  It had to do with a phone call regarding a "delinquent " account.  

Reply by
dmartin42

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Forget about credit score - just tell me how to pay off a $300,000 mortgage in 10 years and still keep current on property taxes, insurance, credit card debt, and student loans! Tell me please....I want to do it!

Reply by
artsyme001

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I know we just paid off our home loan after 15 years of paying with paying on time and now my score goes down. Not only does it effin suck, but someone should fix this problem!!! I would think that my score should go way up not down because of it. I had a higher score and because I have not used my credit in a while, my score went down after 3 months of not using my available credit. So those of us who are responsible and pay on time are penalized?! Really??!!!!

Reply by
boo1230

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Agree they are the biggest scam in the history of mankind... 1000%

Reply by
kiwigaljewel

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What a twisted system we have!! Very frustrating and there's nothing we can do!!

Reply by
Noblehtx

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AMEN!!!

Reply by
jazmin77sue

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They loose a lot of money by you being sooo responsible! They want you to pay on time and not leave them with the debt ,but they want thier money that they projected they would recieve by you only making minimal payments. Also, If you are going to be THAT person whos pays off debt early they can charge you more money for your next lown because your credit score isnt as high as it could be!!!

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I agree with you 100%!  What a scam!!! What a bunch of rip off artists!!!!!

Reply by
gwen12

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I CONCUR!!!!!!!!

Reply by
Inquiryreduction

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Yes sir you are right, these lousy congressmen/women that we put into office are so deep in big business pocket that they allow the consumer to get screwed over by credit reporting agencies and big business. The lower they can keep your score the more money they make.  I mean I have not been late on a payment in decades, yet because I inquire about credit or obtain credit my score goes down.  How about waiting til I miss a payment or am late.  The American system leaves a lot to be desired.

Reply by
bigoreo31

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Goes to show you that FICA Scores are a JOKE !!! When you Pay Off debts , your FICA Score should go up !!! It shows that you have the ability to pay off debts that you have incurred . Especially if you have paid ALL of your Payments on time !!!

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Reply by
cygnusx3

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Too bad about your credit score but Good Job paying off a 30 yr. mortgage in 10 years!!!

Reply by
SGS233

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I have unused accounts. Here is what I did: One is a store card. The risk of compromise for a credit card that I do not use is negligible (no exposure = no risk). If it were to be compromised, it may only be used at a single Merchant. The other is a closed card brand that I simply never use. In fact, the only use the account ever got was to transfer balance from another account for low or 0% interest until THAT was paid off. Otherwise, it was never used for purchases. As a result - both of these accounts have a $0 balance. Both accounts remain open. Store card: Low risk, account remains open, and it is never used. However it may be used for an emergency in the future; Credit card: Has $0 balance, but I called their Customer Service and asked them to "freeze" the card. In order to use it, I must call them to unfreeze it, otherwise it will be declined. Therefore, card cannot be used fraudulently, and there is no temptation to spend it, since it would take effort to reactivate.

Even better - account still shows as "open and paid as agreed" and carries a $0 balance.

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third largest, you forgot organized religion and politics

Reply by
Bookkeeper99

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Also interesting is that different reporting agencies will have you listed with different scores.  There has been as much as a 15-point difference in my credit score from one reporting agency to another, resulting in one reporting me as "Fair" (score was on the high end of Fair) and one reporting me as "Good".  Always best to get reports from all 3 major agencies. 

Reply by
slacter

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By paying off a loan early, you've taken away future earnings for the bank on that loan.  Therefore, you are not as desirable a money maker for the bank because you're too prudent.

Scores are geared towards how likely a bank will make money off of you.  People with less risk of missing payments or defaulting will make a bank more money.  Also (which isn't advertised), people who keep debt active will make the bank more money through interest.  Pay off an account, and that future interest is gone.

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you have to remember, these systems are created by hand full of powerful financial institutions.  the more business you give them, the better is your credit score.  If you close you credit accounts, loan accounts, etc.  then you are debt free.  And you no longer need them.  They dont like this loss of business, and your score decreases.  The longer you are in debt, the more you need them, and the better business they get from you. And better credit scores.  These institutions never want to see you debt free .... remember !!

Reply by
URTHEBEST

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what a screwed up system!

Reply by
lanediver

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I have heard that those who pay off their debt every month are called "dead beats" by those who operate these credit scam agencies. 

Reply by
bluegalye

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wow you are so correct and that is valuable information.

Reply by
Hug56

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I paid off my mortgage and my score went down.  You are so right.

Reply by
Reindav72

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Credit card is a privilege. Is not a right so use it wisely . Wise people make money off of credit card by rewards.

stupid people pay credit card company by paying interest . 

Reply by
gbudhraj

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The best way to keep score growing is have 3-4 credit cards, make your grocery purchases using them in parts like one card a week. Keep paying the outstanding balance before due date. This will increase your credit history for sure and your payments reports 'A' grade and card utilization keep less than 20% always which again reports as 'A' grade.

This way you cheat their systems and stay debt free.

Reply by
Intimnasc

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Ive told my children this for years. Well said and very true. I actually borrowed for my last 2 cars cause paying cash was killing my credit. I also maintain 1-5 percent on my cards just because having 0 balances is bad also. This is ridiculous but true.

Reply by
PhillyLisa

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Wow...that is interesting.  I never thought of it like that.

Reply by
Killeen

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What ever their excuse is, it stinks!  I paid off an old credit card that was used a lot when my husband was still alive just to get his meds.   Now that he is gone I finally managed to pay of that darn card and cancelled it as I was lied too by that particular company on their intrest rates.   That being said,  my score went down even though I have excellent credit.   Who is getting paid off is what I like to know.   Disgusted with the whole idea that to be in debt means good credit.   Hogwash!

Reply by
black4dagalaxy

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you are right

Reply by
17dad

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this is true i paid all of my bills off except for one credit i owed 3200.00 on and i credit score also went down. go figure.

Reply by
gwen12

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I truly believe that.

Reply by
bigoreo31

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Goes to show you that FICA Scores are a JOKE !!! When you Pay Off debts , your FICA Score should go up !!! It shows that you have the ability to pay off debts that you have incurred . Especially if you have paid ALL of your Payments on time !!!

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My score went from an 805 to 766 after paying off mortgage. It is very sad to know that in order to get a good score you have to have debt. Now I could care less about my score, I would rather be debt free.

Reply by
SueInAustin

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Its just unbelieveable that you get penalized for being a responsible person.

Reply by
3spikedbrandi

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You are right the system is designed to keep us in debt

greed will destroy us all

Reply by
mdcarver

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Enough said. Totally agree. They need to revamp their system . We get penalized for paying off our debt, and/or closing accounts we no longer use.... crazy.

Reply by
seth586

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Look at it this way. Why do you need a credit score if you are debt free? A score is only a means to an end. You reached the end, and thats much more important!

Reply by
djbarnard55

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My score went from 698 to 656 because I had a credit card for dental, didn't need it, should have cancelled it, didn't and now my score went down to this.  I'm sick to death of credit cards, necessary "evil" to have to depend on credit cards to pay less in interest.  Doesn't matter to them, rich get rich and the poor get poorer.  Can see why the poor get the shaft and do what they do to survive.

Reply by
bigoreo31

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Goes to show you that FICA Scores are a JOKE !!! When you Pay Off debts , your FICA Score should go up !!! It shows that you have the ability to pay off debts that you have incurred . Especially if you have paid ALL of your Payments on time !!!

Reply by
gr8webdiva

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I agree 100%!  After having my score drop because I've paid loans off in full, I've decided I'd rather be debt free than have an 800 score.  The system is a racket and the practices of the corporations who manage/maintain it are abhorrent.  I'll continue to use CreditKarma because it's free and I can at least see if there's any funky activity on my accounts, but no longer am I even trying to improve my score.  What a ridiculous system this is.

Reply by
earthseeker

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Just contact them and as them to change to paid in full that what I did it help. Make sure you tell them before your last payment.

Reply by
phes1

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I've worked my way up to 765 by taking on a little more debt but I've now come to the same conclusion. To heck with my credit score!  Being debt free with a lower score is preferable to owing money and having a higher score.

Reply by
HisKingdomHeir

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Totally agree. At my age, who needs credit anyway. My husband and I have been extremely responsible with our credit. I purchased a bed from Nebraska Furniture Mart on 18m interest free. We had every intention of paying off way before that timeframe. 1st shock - we received credit cards in the mail with a limit of $20,000 dollars. YIKES! We called and had them reduce the limit to just a few dollars above the remaining cost of the bed. I'm looking at my credit score that fell more than 30 points. I'm done....

Reply by
jamesptplace

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Unfortunately credit is not free! They will get us one way or the other.

Reply by
nd262

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I think you mean "couldn't care less"???

Reply by
starmaker1955

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Just remember friends that for now you live in the devils world... and thus the injustices and greed!  Wont be much longer and things will be better... i agree with BOOMBAMBOOM on i would rather be debt free than to having a high credit score :)) Have a great day all... RIK

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I know all of the credit score formula rules and guidelines used are unfair when appling traditional and responsible financial behavior values. There in lies the problem.  These scoring rules do not look to achieve a score that reflects how "debt free' or "finacially prudunt" you are.  These rules are designed to identify and reward people that are "active" ongoing debtors and how reliable they are in this lifestyle.  A person that is always is debt and is very reliable at constantly paying on debt is the goal or the best debtor.  If you have no debt and have no visible track record of constantly paying on debt, you are an unknown and therefore a risk. For instance....if you have 4 credit cards at a contant 10% utilization balance, a 5 year car loan at 40% original balance, a personal loan at 20% balance, a mortgage and have never had a late payments you are a golden debtor.  On the other hand, if you have paid of you car loan, mortgage, personal loand and all credit cards.....no matter how accelerated or honorable and prudent you were in achieving this goal.....you are now a risk.  I do not know how you can handle debt right now.....you have no debt loan active NOW that I can analyze.  Credit scores are creared to reflect ACTIVE debtors risk....no debt to analyze means more risk....current debt behavior has more value than older  paid off historical debt.

If this is how the credit scoring world must be so be it.  The trully deplorable side of this is where credit scores and used.  YOur credit score affects not only your ability to aquire new debt, it affects you car insurance costs, your ability to get a job even you ability to get rental property....the list is endless if someone is willing to pay for a credit report on you.  As a result, if you are late on paying a department store credit card for the pair of Dockers pant you bought...in theory...and in practice...you could pay more for your car insurance or be viewed and a hiring risk!!!  This not only is terribly unfair and devasting to a persons life, it has a very negative impact on the economy overall.  Too many lates on a credit card and you can lock yourself into a downward financaial spiral you can never fight your way out of.  Late on credit payment...tehn can't get a job....don't have money....borrow more to survive.....can pay that debt...credit gets worse.....then bankrupt....then you are in a terrible position ofr 10 years....life ruined.

Think of it this way....if you were a great baseball player that has played for 10 years, was a starting player every game,  and was considered the best hitter in the game you would get the best contract and salary in the game.  If you were a player that played only 25% of the season, played great or fairly well but also sat out 75% of the time, you will NOT get the best contract.  It is all about risk and CONSTANT performance.  If you want a great credit score stay actively in debt AND behave flawlessly as a debtor.

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Reply by
Taxi818

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Well said. Most are speaking how they want it to be. Not how it is. Old saying. What gave you done for me lately in the credit world. Not yesterday. In theory. They are not punishing you for paying off loan. Please people. Only because your mix has changed. Example. Mortgage ,car payments, credit cards. Mortgage paid off but car loa

Reply by
gwen12

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This is obviously an individual associated with a financial institution.  Your post is stupid but so true but I prefer to take my chances with being debt free.  I have no desire of staying up at night worrying about who I owe; a peace of mind is priceless.  

Reply by
tfitzger

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I was a very lucky person and had enough in scholarships to not have student debt. I worked my rear off during high school and bought a used clunker with cash. By the time I graduated college, I had very little debt to my name. Had I not gotten a career in my chosen field that was easily verifiable, I would not have been able to rent an apartment because I have not visible credit. Thankfully, the local credit union took pity on me and extended me a credit card with a $900 limit. I used that card carefully and built up my score to a point where I can now start looking at being able to purchase a home with my new small family.

All in all, all of these companies are just that...companies. They are out to make money. If you aren't indebeted to them, or they don't trust you will pay off your debts, they won't do business with you. If you want to live without credit, that is perfectly fine. Just be aware that you will have to do a lot more heavy lifting along the way. A mortgage is attainable with lesser credit if you have a strong down. Cars don't have to be, and really shouldn't be if at all possible, financed. Wait a few months before buying the new couch, bed, tv, etc so you can pay all in cash. 

Reply by
1BSA

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Totally agree... It is a system designed to reward debt and potential debt.  Will be hard to reset it, but it must be done.  Perhaps a way to factor in short term debt ( large purchase w/ zero interest for XX months paid off on time) as a good thing... paying off homes, cars, RV;s, early or on time... a good thing...keeping debt low... a good thing....   Is this not the entire purpose of "Managing debt"????

Reply by
ralfdog

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kcap01's post is illogical. Paying off all your debts is a strong indication of how well you would be as an active debtor. It is a track record as consistent as your fingerprints and as dependable as gravity. To suggest otherwise doesn't make sense. The analogy with the baseball player is flawed. Credit usage is not the same as the activity of a player. Whereas the player is put in and out of the game by coaches, the responsible debtor decides whether to play or not. Paid credit is a mark of character, the same character that you are judged by on a daily basis. If a person told the truth 100 percent of the time in the past, this is a strong indicator that he is basically a truthful person. I would call that person trustworthy and would base future dealings on that record. Bottom line is that the credit companies are only interested in keeping you on the hook. Opinions to the contrary are highly suspect, usually propaganda spun by representatives of those institutions.

Reply by
rachelsrealty

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Th BEST explanation of debt and credit that I've ever seen... Great Job!   

Reply by
jlcl01

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go fck your self!

Reply by
Bryant1975

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Wow, Dave Ramey teaches get yourself out of debt, stay debt free.  This scoring tells Americans to stay in debt.  

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I AM NOT MY CREDIT SCORE!

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I paid off my motorcycle loan a couple of months ago. Once it was reported, my score went down 4 points.! *******s! I worked hard to pay off that loan early, just to be punished?
On a good note, I did save myself tons on interest. But it does suck..!!

Reply by
URTHEBEST

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I have paid off 1 credit card and 1 loan and my credit score keeps going down.  I did so my credit score would go up and I could get pre approved to buy a house.  Now I am screwed with a fair credit score.  What the heck!!!  So wrong to do this to a person!!  I think the system sucks!!!

Reply by
bigoreo31

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Goes to show you that FICA Scores are a JOKE !!! When you Pay Off debts , your FICA Score should go up !!! It shows that you have the ability to pay off debts that you have incurred . Especially if you have paid ALL of your Payments on time !!!

Reply by
TexasCharley

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That's exactly it. One way or another they are going to get there's.

Reply by
Barrett9822

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Dave Ramsey that financial help guy said it best, your score is your "HOW MUCH I LOVE BANKS" score

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Does student loans bring your credit score down even though they are deferred?

Reply by
devbo2

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It doesn't seem to affect the score that much. On my report, they say that the reason I have high credit is because I don't have any installment loans even though under the installment loan section, it lists my student loans. I now have 2 student loans in the deferment phase ($7500+$2750) with a credit score of 763 and I'm 21 so my credit history is less than 3 years total. Using this information, it seems to indicate that student loans don't affect the credit score too much.

Reply by
keela2010

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To improve your credit score, you need to make monthly payments so that it shows "goods pymt history". Things like this boost your score!

Reply by
emilyharvey0

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I have heard that student loans don't affect your credit score as much as a revolving account (credit cards). However, when you go to buy a house, they will still take in to consideration how much your monthly payment WILL be and that could affect your interest rate.

If I were you I would contact a lender to see what they suggest (if you are house shopping, anyway).

Reply by
dmoreland2

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no, student loans are a good thing to have on a credit report since you are not missing payments. once you start your repayment process it will look excellent on your credit report because it will show u can pay off a loan.

Reply by
Kathleen

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A deferred loan is still money due in the future.   It's an obligation to the borrower.  But it doesn't mean it will lower the credit score.   Having an income, how many credit cards and balances and how timely you pay your bills will determine your overall credit score. 

Reply by
christiancho

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Students loans affect your credit score by (1) increasing the number of accounts in your credit history, (2) allowing you more of a chance to make payments to show credit worthiness, and (3) (this is indirect but could be a powerful tool) giving you an opportunity to take out student loans to pay off credit card balances at much lower interest rates.

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Reply by
stretch20004

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yes it does my wife didn't pay a loan and sure enough it was on her credit report as unpaid....pay it and you won't have a problem.

Reply by
rainingsweet

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No. It does not bring the credit score down, unless you miss the payment schedule. I have a student loan and I haven't had any negative impact on my credit score.

Reply by
rosiebean17

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 I really haven't seen a change in my scores since I have had my student loan

Reply by
frannyd22

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I have open deferred student loans, I've just paid off my three credit cards between $1,000 and $1,500 each, and my score went up by nearly 100 points.

Reply by
MOMSTWINS

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Student loans raise your credit.  It's considered an investment.

Reply by
debora1977

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dont have a student loan

Reply by
pinksakura12

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Great question devrab....I was going to ask the same question!

Reply by
jwerkmanohio

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No

Reply by
bigmomma252

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i wondered that same thing.

Reply by
poodlekiss1922

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I'm not an expert, but I do have pretty good credit.  I think student loans that are in deferment help your credit score.  They help because they read 'paid as agreed' while they are in deferment, and having accounts in good standing helps your credit score. 

Reply by
shithead99

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I recently took a student loan and it raised my score by 9 points

Reply by
audra1234

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NO.

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Yes!

Reply by
peteangelin

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no.  however, If you intend to purchase a home, some lenders will use 1% of the total student loan balance.  If this happens, you will need to consolidate your loans and make payments as you would a credit card.

Reply by
irene40read

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no, mine has been in forbearance for about 15 yrs. and it has not affected by score

Reply by
aimajin

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I believe so because that is the problem i am having right now. When i go to my loan account, it says i don't owe wil December because i got a defferment, but for some reason it's showing on my credit as not paying...

Reply by
yendihunt

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GOVERNMENT ISSUED (stafford/perkins) Student Loans are not credit based, they will not bring your score down or up, however if you go in default on your student loans, this will show on your credit report. So no, as long as you pay them after your deferment is over, your credit score will not drop.

Reply by
ivopavlov

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No. Only if you make late payments.

Reply by
wittingsun

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No, student loans have no impact if they are deferred, but the longer the deferred status you won't get the history reflected in your score that accounts for you making payments on time.

Reply by
gsarti

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No, your account will be reported as "current" when you're in a deferment. Deferments keep your score from going down and prevent you from default. So don't forget to set them up[!

Reply by
Txtrukr

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I' am pretty sure they do. I have the same issue on this end. Thats why I' am here now.

Reply by
prometheus2wise

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Not necessarily.  While student loans could have an effect on granting you credit, since they aren't  revolving (like a credit card), they don't have a large effect on your score.  If they do, it'll be minimal.  If anything, it provides a good source of payment history when you start paying them.  Don't focus on your score too much, because a good lender won't.

Reply by
bzanca13

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no

Reply by
JMalone278

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I also had a student loan that was deferred and I did notice a low credit score because I still had an outstanding balance on my credit history and it looks bad to future creditors once they see a deferred student loan because it tells them if you cant pay your student loan how are you going to pay on a new credit loan.

Reply by
bear768

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i applied for car loan when the bank saw i  owed student loan they avageage the monthly income againsl payments they  were not going to approve me but wheni showed them it was defferred they did but my score has not been affecteded and i owe 30,000

Reply by
MetherMakela

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Real Estate Investing Mentors have taught me to Rotate Credit Accounts; useing an average of 2 actively at any one time.  Call bank at end of 6 months & request higher limit, then request LOWER Interest rate for loyalty & responsible use; especially if you have been offered better rate by another company.  Then "Retire" [ I did not say close ] those two accounts ] and begin to use 2 other accounts.   This method is win-win. 1. You are NOT running up huge limits; if you are a wise steward of your Income and Outgo. 2. You are useing your % ratios wisely, even though you may have more than a few accounts open.  3. Showing steady usage while keeping your Credit Score healthy and growing.  4. Does NOT red flag your creditors causing them to think you are spending to fast and furious or in Financial Trouble; while preventing them from thinking

you are in Financial Trouble because you have to much credit or are closing accounts.  The face of Credit has changed dramatically over the past 4 years particularly.  Credit is STILL your "Good Name" when it comes to owning your own home, buying a car, sending your children to college.  Since the new bankruptcy laws were put in place Bad credit has changed also.  It really never goes away, but is contracted out to Collection Agencies over and over and over.  Proving you have PAID the bill in full is a nightmare that can follow you for years if not the remainder of your life..........

Reply by
elishamb

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yes they will and don't let anyone tell you different!!  Also if you miss one payment after the defferral stops the will start the charge off process and sell you loan and after you start making your payments thru someone else their damaging information will continue hurting your credit for the next 7 to 10 years after deferred account payments start!!  THANK YOU SALLY MAE and THANK YOU ECMC!!!!!  Direct Loans is helping me to take care of the account and consolidate everything and gave me low $50 a month payments without interest for 8 more years!!  Then it should all be cleaned up and credit report in better standing, but went from 820 to 579 thanks to deferred student loans, but time is on my side.  Also I can hope that it taught me a lesson, and don't put of too tomorrow what should be paid today even if they say it's ok!!!! If I would of needed my credit right after school, I would of been screwed. So watch yourself if wedding bells are in your near future, and take a job to make even a small payment of some type $25 a month is better then nothing, and I  promise you will thank me for this one day!!!!

Reply by
1943cookie

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Does student loans bring your credit score down even tho they are deferred?

Reply by
dcgmoo

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It affects your score, but whether it helps or hurts depends on your other credit situation.  My fiance is in school and a CreditKarma user, and seeing as how many people liked this I figured I'd reply so anyone who sees it later and wonders can read it.

PROS:

- Does show as an active account, so your number of accounts is helped

- Listed as an installment loan, so if you only have credit cards (no loans or mortgages, which is typical for college students) then it helps the variety of accounts

CON:

- It's listed as a balance that is 0% paid, so it does hurt your credit utilization.  If your credit cards have low balances, this won't hurt you too bad and the account/variety will counteract it.  But if you have high/maxed credit cards, then your debt will go up and your utilization will get worse, so it might hurt a bit.

It's a fabulous starting point for future credit building for students and people with low/no credit, as it's an installment loan with guaranteed approval which can be hard to obtain.  If you make payments on-time after graduation, it can be the starting point to the fabled 750+ level before you turn 30.  But if you have trouble with keeping your credit card balances low then it can hurt your credit in the short term, as it does affect utilization which is 30% of the score.

Reply by
arepic

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Hello, I am not an expert, but from my experience (with $300,000 in student loans), student debt does not affect your credit score #, however credit cards do look at all of your types of debt when considering you.

Reply by
aundreaxm

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Not sure if anyone responded to your question but no student loans that are deferred don't bring your credit score down. How do I know well because I have a deferred student loan as well and my credit score is fine.

Reply by
deltachisac77

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If deferred they should have little to no effect on your credit

Reply by
MerryLW

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I hope not. I have over $200K on a doctorate. Does anyone know the answer to this one?

Reply by
ScottyLDS

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I don't think so.  Those type of accounts are usually considered "in good standing" and do not negatively effect your score as an adverse or negative account that went to collections would.  The only negative side to student loans is that if you aren't working, and you are going to school full time (like I have been) and you have accumulated a great deal of loans, it makes it practically impossible to get a non-federal loan or credit card because your debt-to-income ratio is too high.  I tried to get a low-interest loan from Citi Financial in order to pay off a ridiculously high-interest loan from GE Capital (which I would advise never doing business with), and they couldn't grant my request because of my debt-to-income ratio.

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Reply by
bpround

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FEDERAL Student loans harm credit in these slight ways:

* New account, thus diluting overall account age

* Adding the your overall indebtedness, thus making credit utilization higher on the balance (especially if the loan exceeds the original balance)

* As long as you PAY MORE THAN MINIMUMS on loans, your credit might drop.  However, you will bounce back as soon as balances drop.  We are built oin a credit society.

AVOID PRIVATE STUDENT LOANS!

Reply by
akire332

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No it doesn't...at least not yet. Your credit score is based on payment history, among other things. If you are not yet making payments then there is nothing to report. Your student loan issuer knows this. It is noted in your file when you are to start making payments and from THAT point on, if you fail to make payments or whatever they will report it and THEN it will affect your credit score. Right now it might actually be helping your credit score without even doing anything yet because it is considered an installment loan, which is very good as far as credit is concerned.

Reply by
milz09

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No

Reply by
hesterly28

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yes they do because they are a liability

Reply by
lmdawley

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I paid off my student loan this month, and my credit score dropped 16 points.  They don't like that I'm closing my credit accounts!

Reply by
tamariajoy78

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NO! They can not properly be considered as credit or bad because they are deffered or forebeared its only when its defaulted you see the effect

Reply by
rwg63

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Yes; this will affect your credit score very much, don't deferre any payment unless you are in dire need of it...

Reply by
ohme79

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i asked the lady that does my taxes this last year and she told me as long as the loan stays deferred it will not bring your credit score down , but once they are no longer deferred do not fall 2 or more months behind on your payments like i did they will report it and it knocked my score down almost 50 points

Reply by
clearwater07

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How about getting your credit score up to 800-900 then 0 out your cards-use cash VOIOLA!

Reply by
angelo11

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if u dont pay them off! YES!!!!

Reply by
pipes229

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Deferred Student Loans have very little to no impact on your credit score, however, once they come out of deferment or go into forebearance, they can cripple your score if you dont stay on top of them as they greatly increase your debt/income ratio on in a status requiring payments. Forebearance doesn't help as they simple accumulate more interest further increase your debt/income ratio.

Reply by
Gypsy13

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NEW TO THIS SO i HOPE THIS IS RIGHT PLACE TO ASK A ?  STUDENT LOAN BALANCE WAS $15,000.00.   UPDATED, BALANCE PAID IN FULL, BUT CREDIT REPORT STATUS ON ACCOUNT IS LISTED AS CLOSED.  BALANCE PAID IN FULL SHOULD INCREASE MY SCORE.   THIS IS MY INTENTION BUT... IT ACTUALLY LOWERED MY SCORE BY LISTING ACCOUNT STATUS AS CLOSED INSTEAD OF PAID IN FULL...ZERO BALANCE.   PLEASE...CAN SOMEONE SHARE INFORMATION ON HOW TO FIX THIS!!!!!   THANKS FOR LISTENING

Reply by
lildebbie55

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ty

Reply by
hvy916

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My student loan help my credit, but I ensured when paying the interest was also paid.

So I sent in more if they as for $50.00 I sent in $100.00.
 

Reply by
prock251

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no

Reply by
mytuhua

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Just dont pay for it and it will not affect your credit. It will be buried after a few years down the road.

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Reply by
natetc11

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As I entered repayment my scores stayed roughly the same other than fluctuating because of my utilization, so I don't believe they do. If anything, they help your score because it builds credit history even when deferred.

Reply by
tjthomp2903

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Yes they do. After the payment due has been deferred it is still a good idea to try and pay the debt off and most of the time you can do so at a reduce rate and cut the owed amount in half.

Reply by
Juliet83

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My deferred loans actually raised my credit score. They are in good standing each month that they are deferred.

Reply by
develdog

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Was this helpful? Absolutely it was.Everything about Credit Karma is helpful.Finally an organization that truly represents themselves accurately.

Reply by
Camerone9

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only helps shows as an active account that being "paid" every month

Reply by
Kimmie1289

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As I read through some of the comments it seems that what would make perfect sense really does.  Think about this for a moment...  Typically when one pays off a securred loan or similiar type of credit line your score drops rather than increases, true.  Why?  Consumers are dooped into believing that if they pay on time every month and demonstrate responsible financial behaviors that they should be rewarded by being given a good credit score. 

This does not happen, why?  The reality of it is that virtually all banks and credit agencies WANT you to remain in debt.  Big banking has a way of manipulating the monetary system even through credit scores.  Have you ever wondered who actually owns or funds the credit reporting agancies or FICO?  Doing a liitle Google research will help get a much clearer picture of why things are the way they are.  Play the game just dont get in over your head...

Reply by
MSNCRNP

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I just finished post graduate school and yes student loans do effect your credit score. First, student loans are not subsidized past bachelor degree and this does effect your score. Every semester starts a new loan which shows as new installment loans on your credit. I was surprised to find my credit score had dropped 167 points after graduation. The credit bureau had me with 10 installment loans and zero income. I have been working hard to correct this by having all student loans consollidated into one installment and updating my income which is considerable since graduating from NP school. My score is coming back up but is slow.

My advice is to watch your credit score and consollidate loans post graduation so it does not show up as many different installments,

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This is why I'm going with a self-loan system. Get $5000 in the bank, and anytime you need to buy something under that amount, take the loan from yourself, and pay yourself the interest and actual payment. Your total base should increase dramatically in just a few short years, ultimately taking you off this bs credit system. Just keep a few open credit cards to keep your score up.

Credit Karma Team
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Reply by
CKCharmaine

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Hi BB96881, thank you for sharing your system.

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Does paying off 2 credit cards in collections help raise your credit score?  

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It may or may not.  It will give you a lower utilization which should raise your score.  Depending on how long since last payment it may or may not be worth it (5+ years).

Paying them off may help, but will not fix your credit.  The original deliquency will still show.  Your credit will imrprove over time if you are patient and use it wisely.

Reply by
stickz

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no infact you should try a pay for delete everytime you pay on a derrogatory mark you renew its time it will be listed on your credit report the older the mark the less it hurts you. Say you have a $500 debt thats been on report for 4 years you pay it off well now its renewed to the date of paid off which would be new activity so the time it stays on your report is refreshed. Newly & refreshed derrogatory marks hurt you more than leaving it.

Never settle fight to get things removed most places will do a pay for delete option they just want money get it in writing and your golden.

Reply by
Ugggh

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So one would be better off (score-wise) to NOT pay off accounts in collection?  How does that make sense??

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