Protecting Credit While Paying Debt

Paying off credit card debt should improve your credit score, but the wrong approach can actually hurt it. Here's how to protect your credit while eliminating debt.

Don't Close Paid-Off Accounts

When you pay off a credit card, resist the temptation to close it. Closing an account reduces your total available credit, which increases your utilization ratio. It also shortens your average account age. Instead, keep the card open, cut it up if you don't trust yourself, and let the zero balance improve your utilization.

Pay Before the Statement Date

Credit card issuers report your balance to credit bureaus on or near your statement closing date. If you pay down your balance before that date, a lower balance gets reported, immediately improving your utilization ratio and your score.

Avoid New Hard Inquiries

While paying off debt, avoid applying for new credit cards or loans unless it's for consolidation purposes. Each hard inquiry can temporarily reduce your score by 5-10 points. If you're shopping for a HELOC or consolidation loan, do all your applications within a 14-day window — multiple inquiries for the same type of loan are treated as one.

Set Up Autopay for Minimums

The single most damaging thing for your credit score is a late payment. Set up automatic payments for at least the minimum on every card. Then make additional manual payments as you're able. This ensures you never miss a payment even if you forget or get busy.