Can paying off debt hurt your credit?

Posted on April 11, 2006 6 Comments

In some instances, oddly enough, yes.

Thanks to Miss Idalia, a DC fan and friend, for sending me this article by Liz Pulliam Weston from MSNBC’s web site:

When paying bills can hurt your credit
Settling some old debts can actually harm your credit score. Here’s how to do the right thing the right way.

BY LIZ PULLIAM WESTON

Cynthia worked hard to improve her credit scores. She was careful to pay her bills, including an auto loan and a credit card, on time every month. Finally, in December 2004, she decided to pay off the one old debt on her credit reports.

Her scores promptly plunged by as much as 95 points.

“I spent over $1,200 in paying off hospital bills from six years ago, thinking this would help,” she wrote in an e-mail. “Did this hurt me instead?”

Borrowers who try to pay off old delinquencies, charge-offs and collection accounts often learn the hard way: Sometimes, doing the right thing does the wrong thing to your credit.

READ THE REST HERE.

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Comments

6 Responses to “Can paying off debt hurt your credit?”

  1. Anonymous
    April 12th, 2006 @ 1:01 pm

    I had no idea paying could be a bad thing. Thanx for posting this, it was very helpful.

  2. me2press
    April 13th, 2006 @ 5:37 pm

    I know the FICO score can be tough to understand. I will be writing a little about this on my blog very soon.

    http://me2money.blogspot.com/

  3. JLP
    April 14th, 2006 @ 4:44 pm

    I don’t like the message in this article. If you took on the debt, then you should pay it off. Who cares if it messes up your credit score.

    JLP

    AllFinancialMatters.com

  4. Nicole
    April 16th, 2006 @ 10:09 pm

    I tend to agree with JLP. I’m in the “work hard to pay off your debt” camp. But, I posted it as an information piece to consider. More of an odd FYI than something to live by.

  5. Citibank credit card
    September 8th, 2009 @ 12:20 am

    Well it is sad but true. That it why it is always wise not to incur debt. Because no matter what loan that is, even if it is an unpaid library fee ten years ago, it will still show on your credit report and definitely hurt your credit score.

  6. Aussie
    September 17th, 2009 @ 3:40 am

    So far nothing bad has happened to my credit score since i started paying off my debt.

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