How Much Can Paying Off One Credit Card Raise Your Credit Score?

Everyone who has ever used a credit card has a credit score. This score represents how reliable you are as a credit user. Your credit score is a function of multiple variables and circumstances. While determining exactly how much anyone's score will improve because of a single factor is difficult, your score will most likely improve with the more debt you pay off.

Credit Score Calculations

A credit score takes the information found on your credit report and uses it to come up with a number that represents your risk to creditors. While you are legally allowed to view your credit report every year, you are not afforded the same rights when it comes to credit scores. Companies that provide credit scores use proprietary formulas and calculations, and they do not generally reveal how they arrive at the scores. Therefore, it is not easy to determine exactly how much any single action will raise or lower your score.

Credit Score Factors

One of the most commonly used credit score, the FICO score, is based on a number of different factors. These include the kinds of credit you currently use, how many new lines of credit you have, how long you've had each credit line, how much you owe on each and how often you've paid your bills on time. The single largest factor is your bill paying history, making up 35 percent of your score, while the amount of money you owe makes up 30 percent.

Credit Card Payments

If you pay off a credit card, this definitely impacts the two most important factors. As long as you pay off a card on time, you not only improve your history of bill payments but also reduce the amount of money you owe. Either one can increase your credit score, and both together can have a greater impact. While there is no definite way to know how much your score will rise, Yahoo Finance reports that a maxed-out credit card can lower your score from 10 to 45 points, depending on your score. Conversely, paying your card off may raise your score by similar amounts.

Canceling an Account

While paying off any balance you have on your credit cards is great, some people then go on to cancel the credit card account completely. This can have a negative impact on your score. If, for example, you have an account that you've had for years and for which you've always made timely payments, this information is all positive and generally improves your score. If you then pay off a balance and cancel the card, your positive credit history no longer gets counted and can actually lower your score.