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2009 was literally the worst year of my life. Our comfortable lifestyle was shattered by unexpected income loss. We got three months behind on our mortgage and had to put our home on the market. As a result, my credit score fell into the 500’s (poor). Thankfully we found a buyer and we close this Tuesday. The payoff of my house will eliminate 90% of our debt. How will this immediately effect my credit score?
Typo…that’s “affect” not “effect”. Sorry.
The house was not a short sale but was sold at above fair market value.

5 Thoughts on Does eliminating debt immediately help your credit score?
  1. Reply
    Judy
    July 28, 2011 at 9:41 am

    If you had credit cards and you pay them in full – yes your score will get a huge boost.
    Do not close your cards since this will hurt your credit in 2 different ways.

    Remember the fico is a huge mystery. If it weren’t, no one would pay for it.
    It is based on history, so it will take some time for late payments to drop off if you had any. If you have specific questions as to how paying off certain things will affect your score – just ask here.
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  2. Reply
    sylver_starduster
    July 28, 2011 at 10:38 am

    Heck no. I wish!!!!! I resolved my credit by paying off most of my outstanding debts, and its been over a year, and still I cant buy a stick of gum on credit. I called a credit resolving company, and they told me that I still needed to call all the companies, and report that I paid them, and ask that they remove me from the bad credit list. Whats even more crappy is that some companies will not report good credit when you have paid something off, but they sure will report when you are late, or havent paid them at all. I recommend that every time you either pay something off, ask that they report it on your credit report, and most importantly, follow up on all debts that you have paid/ are paying for.

  3. Reply
    bdancer222
    July 28, 2011 at 10:47 am

    It won’t affect your score. Your score is based on how you pay and manage your debts, not on the amount of debt.

    Those late payments will still be on your credit report but will have less impact as they get older. You will need at least 24 months of consistent, on time payment history to see any improvement to your score. You have to rebuild your score to overcome the negatives.

  4. Reply
    My Take on It
    July 28, 2011 at 11:13 am

    Depends
    Did you sell your house via a short sale? If so, your score is going to take another tumble of about 150 points.

    Your score is not going to rebound or shoot up because you pay off your house or even some or all credit card debt.

    You have to re establish credit, or if you have credit cards still, use them and pay them every month either completely off or keep their balances below 30% of your limit.

  5. Reply
    George
    July 28, 2011 at 11:30 am

    You can use this credit monitoring service to pre-estimate future scores for different scenarios of such payments – buildcredit.ifastnet.com

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