I paid off all of my credit cards and some other  debt I had with inheritance money I received. Then I heard it will hurt my credit  score by paying them off. Is this true? I hope not. I thought I was doing  the right thing by taking care of my debt.
There’s no specific score penalty for paying off credit  card balances. However, if your credit score is pulled after the zero  balance appears on your credit report, you might see a difference in your score  compared to what it was before.
That’s because your balance-to-credit limit ratio, or revolving utilization, will have  changed. For the FICO score, a credit score widely used by lenders, utilization  is part of the amounts-owed category, which is worth 30% of your score. The most  heavily weighted category, at 35%, is your payment history.
Obviously, paying off your balance will lower your  utilization down to zero for that account. Utilization is calculated for  individual accounts and across all revolving accounts.
As FICO consumer affairs manager Barry Paperno said  recently in an interview: “The idea here is the lower, the better, in terms of  the utilization percentage, but something is better than nothing.”
That is, you’ll get slightly fewer points for having  a zero balance compared to having the lowest utilization percentage. In your  specific case, the downward change in utilization likely would be  beneficial.
As Paperno said, “Compared to having a 10%, 20%, 30%  utilization, it’s much better to have a zero balance.”
Paying off your debt could “hurt” your credit score slightly if you have zero  balances on all of your revolving accounts at the same time. That penalty  would disappear once you use your cards again.
If you swear off using credit cards again and your  issuers eventually close the accounts for inactivity or stop updating them with  the credit reporting agencies, your score could at that point take a hit.
Luckily, once you pay off your credit card debt,  you’ll be in a great position to manage your credit cards and your finances. Use your cards lightly and pay the  balance in full each month to stay out of debt to get the maximum credit score  benefit from utilization.