What Happens on My Credit Report if I Pay Everything Off?

Your credit reports reflect every loan and credit card payment you make. The Equifax, Experian and TransUnion credit bureaus also show your owed balances and update them regularly as you pay them down and raise them with new purchases. Eventually, if you keep paying and do not use any more of your credit, your balances reach zero. Your lack of debt is visible to lenders who review your reports.

Credit Report Information

Your accounts do not disappear from your credit reports when you completely pay them off. Your credit reports still list data like the dates the accounts were opened, your past high balances, the credit limit and all of your payments. Lenders see if you always paid on time or if you were ever late while paying off the balance. Paid-off accounts with no negative information stay on your reports indefinitely if they remain open, the Experian credit bureau explains. Accounts with negative activity, like delinquent payments, drop off in seven years.

Effects

High debt hurts your credit rating, while paying off accounts is an excellent way to raise your credit score, according to MSN Money writer Liz Pulliam Weston. Focus on paying off revolving accounts first, as installment loan debt is less detrimental than credit cards. Your credit score goes up once you reduce your debt load to less than 30 percent of your available credit lines. Lenders know when you reach that point because they see your balances and spending limits on your credit reports.

Maintenance

Your good credit rating requires maintenance once you pay off all of your bills. Lenders want to see some activity so they know you are currently capable of managing accounts and making payments responsibly. Pulliam Weston recommends regular, light credit card use. Buy a few things and pay the bill in full every month to maintain your zero balance. Do not rack up high debt during the month, even if you pay it off within 30 days, as Pulliam Weston warns that it temporary high balances still hurt your credit score.

Considerations

Your credit card issuers cannot legally impose a penalty if you stop using your accounts once you pay them off. The Credit CARD Act bans inactivity fees, according to the Board of Governors of the Federal Reserve System. Banks can still close unused accounts, so buy something every few months on each account to shield yourself from involuntary closure.

Confirmation

Confirm that your credit reports show all your balances as zero once you pay everything off by ordering free report copies through AnnualCreditReport.com. Equifax, Experian and TransUnion each allow you to order one free copy every 12 months through that site, according to the Federal Trade Commission. Call any bank or other lender that is not reporting your debt as paid in full and ask it to send an update to the credit bureaus.