A common statement I hear when discussing credit with my clients is that they pay off their credit cards every month. This is a good practice to maximize your credit score and save interest payments (you’re only charged interest on balances carried into the next billing cycle). But it is WHEN you pay off your card that’s relative to your credit scores.
Most people pay their credit cards when they receive their monthly statement. This habit actually hurts your credit scores.
Almost all banks report your credit card balance at the STATEMENT DATE, not the due date. So by the time you receive your statement the balance has already been reported to the credit bureaus, effecting your scores.
To beat the system, note your statement date and pay off your cards a few days before you know they statement will be generated. This way you will truly maximize your scores with 100% available credit reporting to the credit bureaus.
Credit card utilization is 30% of your FICO score, falling 2nd to only payment history which is 35% of your FICO score. Age of your credit is 15%, hard inquiries into your credit 10%, and credit mix (auto, credit cards, mortgage) amount for 10% of your FICO score.
So keeping payments on time and low utilization on your credit cards make up 65% of your credit score which is significant.
If you have any questions about how to raise your credit scores, feel free to contact me direct.
President and Certified Credit Expert