Can Paying Off Closed Accounts Raise My Credit Score?

Delinquent accounts negatively affect your credit score. Since a poor credit score impacts your ability to rent an apartment or buy a house or car, you may want to repay these accounts to help repair your credit. However, paying off closed accounts does not, by itself, repair your credit. Paying current bills on time and using credit responsibly affects your credit score more than paying off old accounts.

Collections Accounts

When you pay off a collections account, it will not automatically drop off your credit history. Collection accounts remain on your credit history for seven years after a bill is sent to collections. However, if you pay off an account in collections, you can ask the creditor to list the balance on the closed account as zero, which will help improve your credit score even though the collections account remains on the list.

The Longer Your Track Record, The Better

Think twice before closing old accounts. If you completely close accounts, they will not drop off your credit history. However, the average age of your open accounts affects your credit score more than the number of active accounts. In addition, paying off credit accounts for the purpose of closing them affects your credit history less than making on-time payments to open accounts.

On-Time Payments

Paying bills on time raises your credit score more than any other activity, including paying off collections accounts. A pattern of on-time payments over the past couple of years shows that your bad habits are in your past and that you now use credit responsibly. If you have old debts, paying them off can help your credit score, but you should focus on maintaining good habits to repair your credit.

Rebuilding Credit

Keep one or two credit accounts open and use them responsibly to demonstrate that you know how to use credit. If you owe anything on these accounts, pay them off before using any more credit. Ideally, you should keep your credit balances at less than 20 to 50 percent of your credit limit, as having too high of a debt-to-credit limit ratio can negatively affect your credit score. If you qualify for a limit raise, obtaining one can also help fix your debt-to-credit limit ratio.