Should you make your credit card payment on the due date to build credit? Or is there another time of the month that’s better to improve your credit score? It depends on the credit card issuer, but you should pay on or before the due date to avoid late payments and potential damage to your credit score. You may also want to pay your balance down when it reaches a certain percentage of your credit limit. We will cover the details so you can build your credit score with on-time credit card payments.
The Credit Pros will help improve your credit score by removing inaccurate credit information from your consumer credit reports.
Check your free credit report and FICO credit score, understand, manage, and improve your credit and protect your personal information.
You’re more than just your credit score. With Grain, it’s possible to access a revolving line of credit based solely on your cash flow.
How Paying Credit Cards Affect Your Credit Score
Paying your credit cards affects your payment history and credit utilization ratio, the two most important components of your credit score. Here’s why:
- Payment history makes up 35 percent of your credit score. When you make payments on time payments, positive payment history shows up on your credit report. It could improve your credit score over time. But if you miss a payment and the account reaches 30 or more days past due, your credit score could drop significantly.
- Amounts owed to creditors account for 30 percent of your credit score. Ideally, you want to keep the credit utilization on your credit cards at 30 percent or lower – 10 percent or lower is even better if you want to achieve a good or excellent credit score.
You should strive to pay your bill in full each month instead of settling with the minimum payment. Making the minimum payment will keep your account in good standing, but letting debt sit around can hurt your credit utilization ratio. In addition, most credit cards have high-interest rates, which make it more difficult to repay the debt once you have let it build up for a while.
When Do Credit Card Companies Report Payments to Credit Bureaus?
It depends on the credit card issuer. Most credit card issuers report on a specific day each month, which could be before or after your due date. So, you want to reach out to your credit card issuer directly to confirm so you’ll know when to make your credit card payment(s) each month. If you pay everything before the end of the billing cycle, your credit score won’t get hurt, but your payment history can impact your score quicker if you repay the debt before the issuer reports to the credit bureaus.
When to Pay Your Credit Card to Help You Build Credit
The best time to pay your credit card debt is right now. But, looking beyond this simple answer, there is an optimal time to repay your credit card balance.
Paying Your Credit Card Balance Early
Of course, you want to pay your credit card balance before the due date, if possible. But it’s equally important to keep the reporting date in mind, which is typically close to the statement closing date. If you miss the statement closing date but repay everything before the due date, it will take an extra month for that payment history to show up in your credit report.
Paying Your Credit Card Balance on Time
Falling behind on credit card payments could have severe consequences for your credit score. It is best not to carry a balance into the following billing cycle. But if you pay your statement balance in full each month, you won’t have to worry about fees, penalty APRs and adverse credit reporting.
Making Multiple Credit Card Balance Payments
Your credit utilization ratio should stay below 30%. If utilization gets close to 30% or exceeds it, you should prioritize paying down your credit card balance to preserve your credit rating. You could end up making several payments each month to stay below the 30% threshold, but you’ll also prevent a high rate of utilization from hurting your credit score. You have time to lower your credit utilization ratio before the credit card issuer provides the major credit bureaus with the latest update.
The Credit Pros will help improve your credit score by removing inaccurate credit information from your consumer credit reports.
Check your free credit report and FICO credit score, understand, manage, and improve your credit and protect your personal information.
You’re more than just your credit score. With Grain, it’s possible to access a revolving line of credit based solely on your cash flow.
Paying Your Credit Card Balance in Full
If you pay your credit card balance in full each month before the credit card issuer reports to the credit bureaus, your credit score could benefit. Your credit report will reflect a utilization rate of zero, which positively influences your credit score. This is the best way to approach credit card ownership. If you only spend what you can afford, it’s easier to keep your credit in a good position and never fall behind on debt. Trimming expenses and looking at additional income opportunities can help you pay your credit card balance in full each month. Having a 0% APR Instacash advance would also help ensure you pay your bill on time.
Keeping Credit Card Accounts Open
It could be tempting to close old credit card accounts with a zero balance that you aren’t currently using. However, you should refrain from doing so. Your credit history is one of the key factors in your credit score, and this component improves your score as your credit lines get older. The average age of credit accounts makes up 15 percent of your credit score. Closing old accounts will decrease the average age of your credit accounts and can have a negative impact on your credit score.
Things to Do with Your Credit Card to Build Credit
Beyond paying your credit card bills early or on time each month and keeping your utilization low, here are some ways to use a credit card to build credit:
- Ask a relative or friend to add you as an authorized user on their credit card. You’ll benefit from their positive payment history and establish credit faster. However, your credit score will take a hit if the primary cardholder falls behind on payments. This route is only a good idea if you know people who manage their money well.
- If you can’t get approved for an unsecured product, apply for a secured credit card, and keep the balance at zero. This will guarantee a good credit utilization ratio. If you use the secured card and pay it off each time you use it, you will also build a good payment history.
- Monitor your credit report to ensure your accounts are reported correctly, and no errors exist. If you notice inaccuracies, file disputes right away to have them rectified. This strategy can result in immediate credit score gains. You can obtain a free copy of your credit report each year from each of the three major credit bureaus.
Consider a Credit Builder Loan to Build Credit
Perhaps you’ve been turned down by several credit card companies or would prefer to explore other ways to build credit. A credit builder loan from a reputable company could be a good idea.
Credit builder loans have low loan amounts and help people with bad credit or no credit history improve their scores. The lender will report your payment history to the major credit bureaus, so your credit gets updated accordingly. Most credit builder loans have small loan amounts, usually ranging from $500 to $1,000. You can also get a 6-24 month term, depending on the lender. A longer loan has lower monthly payments since you have more intervals to distribute the loan repayment. This can be a great option for borrowers who operate on tight budgets. On the other hand, you can opt for a shorter loan if you want to get out of debt sooner and pay less interest.
Instead of receiving the loan proceeds right away, the lender holds onto some or all of the credit builder loan’s amount. As a result, you only receive the full loan balance after paying off your credit builder loan. Credit builder loan providers usually conduct soft credit pulls, which will not impact your credit score.
