Does Paying Off the Credit Purchase Immediately Damage Your Score?

Any time you use your credit card or make a payment your actions may affect your credit score. Paying off a purchase you made with your credit card soon after making that purchase might, in some cases, lower your score, but typically only briefly and not by a lot. . While it's not always easy to predict what a specific action will do to your credit score because credit scoring companies use different score calculations, you can get a good idea of what an action will do by understanding the factors that influence credit scores.

Score Factors

A person's credit score is based on various factors, each of which impact the score differently. For example, the FICO score, one widely used credit score, is based on five factors: the consumer's payment history, amounts owed, the length of each item's credit history, the number of new forms of credit and the variety of types of credit the person has.

Balance-to-Credit Ratio

Part of your credit score depends on the amount you owe your creditors. With credit cards, the amount you owe is measured against your card's credit limit, known as a balance-to-credit limit ratio, according to Leslie McFadden, writing for Bankrate.com. Having a zero balance on a credit card may lead to a slightly lower score than having a card with, say, a balance equal to 10 percent of the card's limit. If you make a purchase and immediately follow it by paying off the card balance, therefore, your score may decrease slightly.

Using Your Cards

Having a zero balance on all your credit cards may hurt your credit score, and paying off a purchase soon after making it can lower the score if it reduces your balance to zero. However, making even a small purchase with your credit cards, especially after a period of inactivity, can raise the score again. Creditors use your payment history to judge how good a credit user you are, and even by making a small purchase and adding more information to your payment history you can increase your score by showing you are a responsible credit user.

Raising Your Score

If you make a purchase and quickly pay it off, and do so with a credit card that you have had for a long time but haven't used, this may improve your score more than having a zero balance may lower it. This is because your payment history counts for about 35 percent of your credit score and your credit history accounts for 15 percent while your credit utilization accounts for about 30 percent. A dormant card that hasn't shown up on your credit report for a while but which is suddenly resurrected with your purchase and payment may raise you score because it positively affects your payment history and length of credit.