Why Your Credit Score Didn't Improve After Paying Off Debt

Paying off a debt is often expected to result in an immediate improvement to a credit score. In practice, UK credit scores can remain unchanged, or even temporarily decrease, after a debt is cleared. This article explains the verified mechanisms behind this outcome, including how credit reporting works in the UK, what factors influence scoring, and why the timing and type of debt matter.

This guide does not provide financial advice. It explains how the UK credit reporting system works based on published rules and industry guidance.

Credit scores in the UK are calculated by three main Credit Reference Agencies (CRAs) — Experian, Equifax, and TransUnion — each using different scoring ranges and methodologies. A credit score may not improve after paying off debt for several documented reasons:

1. Credit Mix: Closing an account can reduce the diversity of credit types on a file, which may indirectly affect scoring models.
2. Credit Utilisation: Closing a card reduces your total available credit, potentially increasing your ratio if you carry balances elsewhere.
3. Account Age: It can shorten the average age of your credit history.
4. Reporting Lag: Updates are not instantaneous. Lenders record payments in 30-45 day cycles; it takes 4-8 weeks for changes to appear.

If a debt was in default, paying it off changes its status to "satisfied" but does not remove the default record. That record remains on the credit file for six years from the date the default was originally registered, regardless of when the debt was paid.

The UK credit reporting system is built on a framework of data sharing between lenders, CRAs, and regulators. Understanding why a score may not change after paying off debt requires an understanding of each layer in this system.

Credit Reference Agencies and Scoring

The UK has three main CRAs: Experian, Equifax, and TransUnion. Each agency maintains individual credit files and calculates credit scores using its own proprietary methodology.

• Experian (0–999)
• Equifax (0–1000)
• TransUnion (0–710)

Because each CRA may hold different information — not all lenders report to all three agencies — scores can vary across CRAs for the same individual at the same point in time.

How Lenders Report Data

Lenders report payment information to CRAs on a cyclical basis, typically every 30 to 45 days. This is not a statutory requirement but reflects industry-standard practice. It is also important to note that lenders often report statement balances rather than current balances, meaning the data held by a CRA may not reflect the most recent account activity.

Why Paying Off Debt Can Reduce a Score

Credit scores may drop after paying off debt due to changes in three areas:

1. Credit mix: Paying off an instalment loan — such as a car loan or personal loan — removes that account type from the credit file. If it was the only instalment account, the overall diversity of credit types is reduced, which can affect the score.
2. Credit utilisation ratio: This is the percentage of available revolving credit that is currently being used. Closing a credit card after paying it off reduces total available credit. If other balances remain, your overall ratio increases, which can negatively affect the score. (Read more: Credit Utilisation Explained).
3. Credit history length: Closing an older account can affect how some scoring models assess account age, particularly where open accounts are weighted more heavily.

Reporting Delays

After a debt is paid off, the update does not appear on a credit file immediately:

• Payment processing: 1-3 days.
• Lender reporting cycle: Up to 30-45 days.
• CRA processing: A few additional days.
• Total Time: Typically 4 to 8 weeks.

The following rules and timelines are drawn from published UK regulatory and industry sources.

Default registration

A default is typically registered on a credit file after 3 to 6 months of missed payments. Before a default can be registered on a regulated credit agreement, the lender must issue a formal default notice under Section 87 of the Consumer Credit Act 1974, giving at least 14 days to remedy the breach.

Default retention

A default remains on a credit file for six years from the date the default was registered, not from the date the debt is paid. Paying off the debt changes the status of the default to "satisfied" but does not remove the entry. (See: How Long Defaults Stay on Your File).

Other Retentions

• CCJs: 6 years (unless paid within 1 month).
• Bankruptcies/IVAs: 6 years (can be extended).
• Hard Searches: 2 years.
• Closed Accounts: Positive history can remain for 6 years.

Credit utilisation thresholds

According to published guidance, a credit utilisation ratio below 25–30% is generally considered favourable. Ratios above 50% may negatively affect a credit rating, and ratios above 75% can significantly damage a score.

Paying off debt does not always improve a score

Because credit scores reflect a range of factors — including credit mix, utilisation, and account age — the removal of an account can alter the balance of these factors in ways that temporarily reduce the score, even though the debt itself has been cleared.

A "satisfied" default is not the same as no default

Once a default has been registered, paying off the underlying debt changes the marker to "satisfied," but the default record itself remains visible for six years from the original default date.

Scores differ between CRAs

Because each CRA uses a different scoring range and methodology, and may hold different data, an individual's score at one agency may not match their score at another.

Statement balances may be reported, not current balances

Lenders typically report the balance shown on the most recent statement, not the real-time balance. A credit card that has been paid off between statements may still show an outstanding balance on the credit file until the next reporting cycle.

Scotland

Default notice procedures under the Consumer Credit Act differ slightly. Scottish creditors may issue a "calling-up notice" and debt may become statute-barred after 5 years (Prescription and Limitation (Scotland) Act 1973) rather than 6 years.

Overdrafts

Overdrafts do not involve regular monthly payments. According to SCOR guidance, defaults on overdrafts normally occur when the account is 3 months in arrears but are recorded by 6 months.

Sold debts

When a debt is sold to a collection agency, the original default date must be retained. The debt collector creates a new entry, but the 6-year clock does not restart.

Remedying a breach within the notice period

Under Section 89 of the Consumer Credit Act 1974, if you remedy a breach (pay the arrears) within the 14-day Default Notice period, the breach is treated as not having occurred, and the default should not be registered.

A person who pays off a debt may not see an immediate improvement in their credit score for a combination of reasons. The payment may not yet have been reported to the CRAs. Once reported, the closure of the account may affect credit mix or utilisation in ways that offset the positive effect.

If the debt was in default, the record remains for 6 years.

Consumers have the right to request a free Statutory Credit Report from each CRA to check what information is held. CRAs have up to 30 days to respond to disputes about inaccurate information.

• Paying off a debt does not guarantee an immediate score improvement because clearing or closing an account can affect credit mix, credit utilisation, and account age.
• Lenders report to CRAs on cycles of approximately 30 to 45 days; changes typically take 4-8 weeks to appear.
• If a debt was in default, paying it off changes the status to "satisfied" but the record remains for 6 years.
• Consumers have a legal right to access a free statutory credit report from each CRA to verify their data.