Does Paying Debt Slowly Build More Credit?
A common misconception, especially among those newer to credit, is that paying down debt slowly over time is a superior way to "build credit." People might believe that making payments on a large purchase over six months, for example, demonstrates more creditworthiness than paying it off immediately. This is generally not true and can be financially disadvantageous.
The Core Misunderstanding: "Building Credit" vs. Financial Prudence
Intentionally paying down high-interest debt slowly is a poor financial decision because you accrue more interest. More importantly, from a FICO scoring perspective, it does NOT aid your scores more than paying it off quickly. Your scores will generally be the same once the debt is paid off, regardless of whether you did it in one lump sum or stretched it out over many months (assuming all payments were on time). There is no "credit building" advantage to choosing a slower repayment path for a specific debt.
Credit Cards
The advice for credit cards is almost always to pay your statement balances in full every month. Carrying a balance and paying interest just to "show payment history" or "build credit" is unnecessary and costly. Each month your account is open and you make an on-time payment (or have no payment due because of a zero balance), it contributes positively to your payment history. Dragging out payments on a particular balance doesn't enhance this.
Installment Loans
The same principle applies to installment loans (e.g., auto loans, personal loans). If you have a 5-year auto loan and decide to pay it off a year early, that's perfectly fine. Continuing to pay it for the extra year doesn't "build more credit." Once the loan is closed (whether in 4 years or 5 years), its impact on your FICO score from that point forward will be largely the same regarding its closed status and payment history.
Credit experts have clarified an important point about timing: if you compare your score today (having just paid off a loan) versus your score six months from now (had you paid it slowly), the score in six months might be different due to natural account aging across your whole profile. However, this difference is due to the passage of time and overall aging metrics, not because the method of paying that specific loan slowly was better. If the only variable is how quickly a single debt is paid, the long-term "credit building" outcome is the same.
Why This Myth Persists
- Confusion with Payment History: People know making on-time payments is good. They might then incorrectly assume more payments on the same debt somehow equate to better payment history in the eyes of scoring models.
- Misunderstanding "Credit Builder" Accounts: Some "credit builder" installment loans are designed to be paid over time. This is how installment loans function. The "building" aspect comes from establishing a new type of credit and making consistent on-time payments, not from the slowness of repayment itself.
The Financial Cost
The most significant downside of this myth is the financial cost. Paying debt slowly when you could pay it faster means paying more in interest, which is money that could be saved or used elsewhere.
Conclusion
Paying down debt slowly does not build more credit than paying it off responsibly and as quickly as your finances allow (especially for high-interest revolving debt, which should ideally be paid in full each statement cycle). Focus on making all your payments on time and managing your overall credit profile wisely. Don't fall into the trap of paying unnecessary interest under the false pretense that it's somehow better for your credit score.