Paying your credit card bill on these two specific days can dramatically increase your credit score. When you choose to pay your credit card bill affects 65% of your score. There are a lot of myths out there about how credit scores and credit payments are related, and a few popular strategies about when to pay your bill that are not all that effective. There is, however, a surprisingly simple method that does work and can help you raise your score to improve your credit health and prepare for a major financial event like taking out a mortgage.
What is the ideal time to pay your credit card debt each billing cycle?
Knowing when a lender or credit card provider reports new information can give you a quick credit score win even without changing the amount that you’re going to pay. Here are some dates and concepts to be aware of.
Statement open date - this date marks the beginning of the timeframe during which your credit card transactions and activities will be recorded for that specific billing cycle.
Statement close date - the end date of the billing period for your credit card statement
Statement close date = statement date = reporting date
Due date - the date by which you must make at least the minimum payment on your credit card balance to the credit card issuer.
Debunking a few myths
There are 4 myths that can become huge time-wasters if left unchecked
Myth 1: Carrying a balance is necessary
Fact: Carrying a small balance could potentially raise your score but it’s unnecessary and you have to pay interest
Myth 2: Paying your credit card bill early will earn you fewer rewards points or cashback
Fact: Paying your credit card bill early or on time has no impact on the rewards you earn. Rewards are typically based on the amount you spend on the credit card, not on when you make the payment. However, carrying a balance and paying interest may offset the value of any rewards earned.
Myth 3: You get extra credit for making a payment early
Fact: It’s generally the case that you don't get any extra credit or benefit from making credit card payments earlier than the due date. The credit bureaus are primarily concerned with whether you make your payments on time and the amount of your outstanding balance at the time the statement is generated. And, creditors only report your bheavior to the credit bureaus once a month.
Myth 4: Pay your credit card after every transaction to raise your score
Fact: The idea that you need to pay your credit card immediately after every transaction to raise your credit score is not entirely accurate. While making timely payments is crucial for maintaining a good credit score, the timing of your payments in relation to individual transactions doesn't have a significant impact on your credit score.
The 15/3 strategy, does it work?
The 15/3 strategy claims you can help your credit score dramatically by making half your credit card payment 15 days before your account statement due date and the other half-payment three days before.
Typically, on or near your statement closing date — not on the payment due date — your credit card company reports to the credit bureau or bureaus with such information as your balance and credit limit. It does this only once a month. Your due date comes about three weeks after that. So targeting the due date makes no sense. Making a payment 15 days and three days before the credit card due date, as the 15/3 hack suggests, is too late to influence credit reporting for that billing cycle.
If you are currently using the 15/3 method, you may be improving your credit score, but the 15 and 3 are irrelevant. You might as well make a single payment prior to the closing date. The creditor is just reporting what your balance is at the end of the billing cycle.
The 4-day dance
After years in this credit card game theres one method that works best for raising your credit score and it keeps you within the 10% credit utilization range that actually helps your score instead of hurting it.
What you have to do is pay 95% of your account balance 2 days before your statement/closing date, and then the remaining 5% 2 days after that same statement/closing date.
Credit card utilization, a tricky factor
When, you pay your credit card bill can have a massive effect on your credit score month to month because it can cause huge swings in your credit utilization rate.
Here’s a breakdown on how increasing your “reported credit utilization” affects your credit score.
- 0% (no balance reported) – Slight penalty to your credit score
- 1% to 9% – Slight boost to your credit score
- 10% to 30% – Neutral to slight penalty to your credit score
- 30% to 100% – Larger penalty to your credit score
- Over 100% – Huge penalty to your credit score
Taking into account how these utilization percentages affect your credit score, you’ll want to pay 95% of your account balance 2 days before your statement/closing date and then the remaining 5% 2 days after that same statement/closing date.
Benefits of the 4-day dance
This does 3 great things for your credit
- It lowers your reported credit utilization rate - reporting happens on or the day after your statement closing date, and since you paid 95% of your balance before that date, that means you only reported a 5% utilization rate for that month. Not only do you fall within the 1-9% bracket, giving you a slight boost to your credit score but you also match what the FICO scoring company calls a “high achiever”. These people have below a 7% utilization on average.
- You avoid the “no balance” penalty - many people have found their credit scores dipped when they let a $0 balance report to the credit bureaus. Since you’re allowing 5% of your account balance to report to the bureaus that means you avoid this penalty completely.
- It guarantees you’ll never be charged interest - interest only accrues when you fail to pay your statement balance before your due date. since you already paid 100% of your credit card balance 2 days after your statement/closing date which is around 20 days before your due date you’re guaranteed to pay exactly $0.00 in interest.
If you’re trying to qualify for a mortgage for your dream home, this simple trick of paying your credit card bill on these two specific days can seriously help you shoot for your best possible credit score.
.png)
