Why did my credit score drop after paying off my credit card?
If your credit score dropped after paying off your credit cards, you may be in for a surprise with three reasons why and what you can do to improve it!
You paid of a credit card but your score dropped...
If you closed the account your score will drop

Credit Utilization Ratio
When you close a credit card, your overall credit limit decreases. This change directly impacts your credit utilization ratio—the percentage of your available credit that you’re using. For instance:
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Before Closing the Card:
You have three cards with a combined credit limit of $12,000 and a $1,500 balance. Your credit utilization ratio is 12.5%. -
After Closing the Card:
If you close one card and your combined credit limit drops to $4,000, your utilization jumps to 37.5%. This is considered high and can lower your credit score significantly.
We recommend keeping your credit utilization ratio below 10% to maintain a healthy score. Paying off a card is great, but closing it may unintentionally damage your score.Â
Do you know where your usage is at? Get a free consultation to help improve your credit.Â

Credit History
Another reason your score might drop is related to the length of your credit history. Closing an old credit card reduces the average age of your accounts, which can negatively impact your score. Keeping accounts open, even if unused, helps preserve the length of your credit history and strengthens your credit profile.

Credit Diversity
Credit scoring models reward individuals who demonstrate responsible use of diverse types of credit. Closing a credit card could limit your variety of open credit accounts, especially if you rely solely on installment loans like car payments or mortgages..
What Can You Do to Protect Your Credit Score?
Instead of closing your paid-off credit card, consider these 3 strategies:
- Keep the Card Open: Use it sparingly for small purchases and pay off the balance immediately. This helps maintain a healthy credit utilization ratio.
- Monitor Your Credit Regularly: Check your credit reports for changes and inaccuracies. Knowing what affects your score can help you plan better.
- Consult a Credit Counselor: Our credit counselors at Credit Services of America can help you create a personalized plan to achieve your credit and financial goals.
