Updating your credit rating after paying off debts: how long to wait and can you speed up the process

Americans are taking a tough stance on debt in 2021, and many people have made debt reduction their primary goal. How their payment will affect the credit rating and how quickly it will be updated, the newspaper said. Fox Business.

According to research by Fidelity Investments for December 2020:

• 44% of Americans Pledged to Save More Money in 2021
• 43% said they were going to pay off their debts
• 54% said they want to lead a debt-free life

The relationship between debt reduction and credit rating

Increasingly, Americans are asking a simple question: "When will I see an increase in my credit rating after paying off my debts?"

“There is nothing worse than actively trying to improve your credit rating,” said Chris Panteli, founder of Life Upswing, a UK-based financial news and advisory platform. "It's a shame not to know if all this hard work actually had an effect."

First of all, you need to pay attention to credit card companies, banks, retailers and other lenders that provide credit to consumers.

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“Any change in your credit rating after you pay off the debt depends on the creditor's report,” Panteli said. "Although they usually do this on an ongoing basis, lenders are not really required to report anything to the credit bureaus."

Next, you should start using a credit monitoring service to track changes in your credit rating.

Checking the update schedule

Experts note that the credit rating renewal cycle schedules for major lenders vary.

“Each credit issuer has its own rules on how they report your debt and how often,” said Matthew Lally, GiftYak's chief curator. - Some use the balance of your statement as of the closing date, while others report your balance whenever it has been paid in full. Your score will be updated by the bureau as soon as they receive this data, but it is impossible to say exactly when this will happen. "

Lally breaks down reporting cycles across several large financial institutions as follows:

1. American Express reports the balance as of the date of closing the account / card

“Sometimes the report is sent two or three days before the closing date,” Lally said. "Therefore, if you make a large purchase on the last day of the account, you could eat up most of your credit history and lower your credit rating."

2. Chase will also report the balance of your debt at the closing date

“However, if you call Chase, they can also do an off-cycle report,” added Lally. - Pay the bill in full and call Chase. They will contact the reporting agencies and zero your debt, which will improve your credit rating. "

3. The US Bank is one of the largest institutions that reports on the use of the loan on the 1st day of each month.

“No matter what your account closure date is, your balance for each month will be sent to the reporting agencies,” Lally added.

Tips to Improve Your Credit Score

With diligence and a little patience, financial service consumers can improve their credit score.

1. Use a holistic view of credit and be proactive

Many consumers can score 700 points in a few months.

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“Just be methodical, detailed and consistent,” said Monica Eaton-Cardone, co-founder of Chargebacks911, a fintech company. “This means paying bills, paying off old debts with creditors or agencies, many of whom are willing to negotiate and correct credit rating errors. These are the low hanging fruit in the credit rating market. ”

2. Prioritize your installment loans

If there is no installment loan on your credit report (car loan, mortgage, or whatever), you must do so.

“Credit rating formulas love to see variety in your credit history. If you can keep this loan at a low utilization rate (10% or less), it can significantly improve your rating, ”Lally said.

3. Above all, pay your bills on time

Undoubtedly, the most important advice for accelerating credit rating growth is to pay off your debts on time.

"This factor alone accounts for 35% of the FICO score," said Rob Berger, founder of Allcards.com. - Due to this, the loan utilization rate will be below 30%, and preferably below 10%. Bills must be paid on time. New loans should also be avoided unless necessary. Repeated loan requests will affect your rating. "

“Also, be patient - you can't rush your credit history,” Berger said.