When tackling debt, the conventional advice is to pay off accounts completely and close them out. However, if your goal is to **maximize your credit score** over the long term, a slightly more nuanced strategy exists, especially for your very oldest accounts: the **$100 Debt Strategy.**
This technique is designed to protect the single most valuable factor in your credit score: the **Age of Credit History** (which accounts for about 15% of your FICO score).
Why $100 and Why Not Zero?
Your credit score benefits immensely from having old, established accounts. If you pay off an account and the creditor closes it (or you choose to close it), the account's history will eventually fall off your report, shortening your overall **Average Age of Accounts (AAoA)**. This can hurt your score.
The strategy is to pay the balance down aggressively until it reaches a small, nominal amount—ideally **$100 or less**—and then stop the aggressive payments. This keeps the account technically **open** and **active** in the eyes of the creditor and the credit bureaus.
By keeping the balance low, you minimize interest paid while maximizing the account's longevity on your credit report.
The Role of Micropayments
Once the balance is near $100, your focus shifts from eliminating debt to maintaining the account's status. This is where **micropayments** come in.
Instead of paying the minimum required payment, you should implement a system of very small, regular payments (e.g., **$1 or $2 every month** or two) that covers the accruing interest and perhaps a small amount of the principal.
The goal of these micropayments is two-fold:
- **Maintain "Active" Status:** Regular activity on the account prevents the creditor from flagging it as inactive or paying it off and closing it automatically.
- **Minimize Interest:** Since the principal is so low, the interest charges are also minimal, meaning your tiny payment is usually enough to keep the balance steady, protecting your credit history for years to come.
Important Considerations
- **Interest Rate:** This strategy works best on accounts with a **low interest rate**. If the rate is high (e.g., 20%+), the interest can quickly outpace your micropayments, making the cost too high for the credit benefit.
- **Utilization:** Ensure the $100 balance is low relative to the account's limit. A $100 balance on a $20,000 credit limit is ideal; $100 on a $500 limit still results in a high utilization rate, which will *hurt* your score.
- **Discipline:** You must be absolutely disciplined about making those micropayments on time. A single missed payment will negate any credit benefit and incur fees.