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Contributor
severine
Posts: 122
Registered: ‎08-19-2012

Ideal time to make the monthly payment?

I've been reading this forum with great interest and in the short time I've been on here I've gotten quite an education! My question is this: when is the ideal time of the month to pay one's cc bills? What is the relationship between when you pay and what is reported? Thanks for any insights you might have:smileyhappy:

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jsucool76
Posts: 2,770
Registered: ‎12-11-2011

Re: Ideal time to make the monthly payment?

Lenders usually report right around your statement cut date, therefore if you have a balance of $750 on a $1500 limit (50% utilization) your best bet would be (if you can of course) pay down your balance before your statement cuts, and then your reported balance would be whatever you left on your card (if you left anything). 

 

From what I've heard if you plan on applying for credit it is best to leave a 1%-9% balance on 1 card and let the rest report $0, and through this you will get a bit of a score increase. 

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Roarmeister
Posts: 311
Registered: ‎04-21-2012

Re: Ideal time to make the monthly payment?

[ Edited ]

jsucool76 wrote:

Lenders usually report right around your statement cut date, therefore if you have a balance of $750 on a $1500 limit (50% utilization) your best bet would be (if you can of course) pay down your balance before your statement cuts, and then your reported balance would be whatever you left on your card (if you left anything). 

 

From what I've heard if you plan on applying for credit it is best to leave a 1%-9% balance on 1 card and let the rest report $0, and through this you will get a bit of a score increase. 


+1 except that I disagree with the notion that 1-9% is somehow a magic number range.  (This is an oft quoted number but I have yet to see ANY concrete evidence that these particular numbers mean anything.  More likely it is just an accepted quotation and people just keeping using it as some sort of Gospel even though there is nothing to support "1-9%" as fact).  If anything, there are no magic numbers or levels of balance that improve your score.  It is most likely a gradual improvement in score as you lower your utilization as suggested by this chart --->  Credit Card Utilization and Score

Nevertheless, I promote a statement balance of under 10% for utilization but not a B&W number range for the best scores.  Even a 0.1% utilization or $0.01 balance can be good.  Keeping a 0% utilization number for long periods MAY hurt you if you aren't using your card at all but if your account is still showing that you are making payments on the card but just not showing a balance on the statement date I doubt if you see any negative scoring effects.

Paying your credit card more than once a month may help most people.  This keeps the overall balance down in the first place.  Secondly if you pay the balance a few days before the statement day then you will have a $0 balance. Your card will still report that you made payments and therefore you are using your credit.  Essentially you are treating your credit card as a manual debit card but with the additional benefits of the credit card!

 

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LS2982
Posts: 15,434
Registered: ‎04-09-2011

Re: Ideal time to make the monthly payment?


severine wrote:

I've been reading this forum with great interest and in the short time I've been on here I've gotten quite an education! My question is this: when is the ideal time of the month to pay one's cc bills? What is the relationship between when you pay and what is reported? Thanks for any insights you might have:smileyhappy:


 

You need to call your creditor and find out when your statement closing date is, and on or before that date is when you should pay monthly.




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OptimalFICO
Posts: 203
Registered: ‎07-05-2009

Re: Ideal time to make the monthly payment?


severine wrote:

when is the ideal time of the month to pay one's cc bills? What is the relationship between when you pay and what is reported? Thanks for any insights you might have:smileyhappy:


The ideal time of month to pay one's CC bills is a matter of personal circumstance. The most important factor in determining this is to be aware of and manage your revolving debt ratios because they can have a substantial impact on FICO scores. Call your revolving account creditors and ask what date they report to the CRAs (for all of mine, it is the statement cycle date).

 

It is considered best to maintain balances below 10% of the CL (below 30% if you must, but never let a balance report at 50% or above). According to Al Bingham, The Road to 850, "Any reported balance above 10% of the credit limit is considered a high debt ratio. As this ratio increases, more pressure is applied to FICO scores... Any revolving account balance less than 10% of its high credit limit is the point where FICO will not penalize FICO scores. Anything above this ratio will drop FICO scores." The impact can be slight to substantial, so be especially attentive to accounts with smaller CLs (e.g., with a $300 CL, work to keep your reported balance below $30, either by charging less or making a payment in advance of your card's reporting date).

 

Be aware that some lenders pull their account info a day or two before they send it to the CRAs. So a lender may pull the account info on the 24th of each month before it is sent to the CRAs on the 25th. It also usually takes several days for the CRAs to process the account info from lenders and put it in your credit file, so the new balance may not appear on your CR for a few days after the info is sent to the CRAs. Often there is a 60 day lag in balances showing on CRs. There is pressure from major lenders to speed up the credit cycle reporting because a lot can happen in 60 days. Some lenders now report more than once a month and there will likely be an increase in the numbers of lenders doing so in order to provide more up-to-date account info in one's CR.

 

To get FICO points for revolving accounts, there must be some minimum account and balance activity, without having an excessive number of accounts with a balance. An account with a balance reveals that one is actively using that account. However, it can raise one's level of credit risk if managing account balances on too many accounts. Personally, I use one card every month, never allowing the balance to exceed 9%, and I pay it off upon receiving the statement. I have three other cards that I use for a small purchase every 3-4 months to show periodic activity for FICO and so the creditors don't close the accounts for inactivity. (Contrary to what was reported above, you do need to allow at least a small balance to report in order to get credit from FICO. A zero reported balance, regardless of payments during the month, won't do it. I actually tried this with my fiance's two accounts because we have been shopping for a home. After several months of charging and making payments to zero his balances before the creditors reported to the CRAs, the top reason code adversely affecting his FICO scores is "No recent revolving balances #24, and No recent bankcard balances #29). Further note that you don't have to use every card every month in order to show periodic usage, though I'm not sure where the actual cut off is. For my credit cards that I don't use monthly, I make sure to use them once every four months and would never let it go longer than six months for fear they might be closed due to inactivity.

 

Despite the need to show periodic usage, also according to Al Bingham, it is a good idea to ensure that your credit report shows no more than two bank revolving accounts or national credit cards with a balance at a time. If you are applying for credit, it is best to have only one showing. Moreover, it is a wise strategy to limit the total number of accounts in your CR that show a balance to no more than five (this includes revolving accounts, a mortgage and car, student or other installment loans, etc). FICO scores will drop with each additional balance. Any number of accounts above 10 with a balance will cause an even greater drop to FICO scores.

Contributor
tbolt2
Posts: 84
Registered: ‎03-11-2011

Re: Ideal time to make the monthly payment?

Generally, when you pay doesn't matter as long as it is by the due date.

 

The CC is going to report shortly after the statement generates.  I've seen posts about mid cycle or early reporting before a statement cuts, but I have never had that happen to me.

 

When the CC reports to the bureaus can vary from CC to CC. This is what happened with two of my cards this month. I paid on or before the due date:

 

USAA

Due date               08/13

Statement date    08/18

Equifax update     08/21

Experian update  probably on 08/22

TransUnion          unknown - they've been agonizingly slow to update this month. They're running 4 days behind EQ and 6 days behind EX so far this month on my reports (I'm pulling daily through USAA's CMS).

 

Capital One

Due date               07/25

Statement date    07/27

Equifax update     08/01

Experian update   07/30

Trans Union          08/03

 

As you can see, there's a big difference in the lag time between the payment date and statement date between the two accounts, but both are close on the lag time between statement date and Bureau reporting.

 


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andre181
Posts: 624
Registered: ‎07-29-2010

Re: Ideal time to make the monthly payment?

When is the ideal time to pay your credit card bill? Before the due date. :smileyhappy:

 

I'm just kidding of course, but the real answer to your question depends on your goals. If you are aiming for score maximization because you are anticipating applying for something, pay about 2-3 days before you statement cuts so as to minimize utilization and thus maximizing score.

 

If you aren't going to be applying for something, don't stress out too much about utilization. If you don't pay before you statement cuts, its no big deal. As another post above said, people here place 9% or less as some magic number. Its not magic and it really doesn't matter. Keep your utilization where you are comfortable. In my opinion, 30% is a much better guideline.

 

Based on your signature, you've got some great cards, nice limits, and a good score, so you are clearly doing something right. Just keep it up!

 

 

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Contributor
severine
Posts: 122
Registered: ‎08-19-2012

Re: Ideal time to make the monthly payment?


andre181 wrote:

When is the ideal time to pay your credit card bill? Before the due date. :smileyhappy:

 

I'm just kidding of course, but the real answer to your question depends on your goals. If you are aiming for score maximization because you are anticipating applying for something, pay about 2-3 days before you statement cuts so as to minimize utilization and thus maximizing score.

 

If you aren't going to be applying for something, don't stress out too much about utilization. If you don't pay before you statement cuts, its no big deal. As another post above said, people here place 9% or less as some magic number. Its not magic and it really doesn't matter. Keep your utilization where you are comfortable. In my opinion, 30% is a much better guideline.

 

Based on your signature, you've got some great cards, nice limits, and a good score, so you are clearly doing something right. Just keep it up!

 

 


Thank you so much!

 

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New Contributor
CreviceTool
Posts: 51
Registered: ‎08-14-2012

Re: Ideal time to make the monthly payment?

[ Edited ]

jsucool76 wrote:

Lenders usually report right around your statement cut date, therefore if you have a balance of $750 on a $1500 limit (50% utilization) your best bet would be (if you can of course) pay down your balance before your statement cuts, and then your reported balance would be whatever you left on your card (if you left anything). 


This is the trick I didn't know about until I learned how they score... when making payments, it's the current card balance that matters, not the balance at the date of your last statement.  I had a single Cap1 card with a small $2.5k CL.  I always PIF every month, always on time.  Yet that card was significantly hurting my score, because I used it a lot.  If I charged $1000 in a month, a statement would come out showing a balance of $1000.  I would pay $1000, but by the time the next statement cut-off, there might be $1000 of new charges on the card.  So even though I was paying the statement balance in full every month, I was always showing a balance of around $1000, give or take.  But all it took was making a "double payment" one month (the current statement balance, plus any current charges to date) to knock that balance down and get a huge jump in my score.  Then once my score went up, I got a few more cards so my typical monthly spending wouldn't be such a large percentage of my total CL.  :smileywink:

Valued Member
OptimalFICO
Posts: 203
Registered: ‎07-05-2009

Re: Ideal time to make the monthly payment?


CreviceTool wrote:

jsucool76 wrote:

Lenders usually report right around your statement cut date, therefore if you have a balance of $750 on a $1500 limit (50% utilization) your best bet would be (if you can of course) pay down your balance before your statement cuts, and then your reported balance would be whatever you left on your card (if you left anything). 


This is the trick I didn't know about until I learned how they score... when making payments, it's the current card balance that matters, not the balance at the date of your last statement.  I had a single Cap1 card with a small $2.5k CL.  I always PIF every month, always on time.  Yet that card was significantly hurting my score, because I used it a lot.  If I charged $1000 in a month, a statement would come out showing a balance of $1000.  I would pay $1000, but by the time the next statement cut-off, there might be $1000 of new charges on the card.  So even though I was paying the statement balance in full every month, I was always showing a balance of around $1000, give or take.  But all it took was making a "double payment" one month (the current statement balance, plus any current charges to date) to knock that balance down and get a huge jump in my score.  Then once my score went up, I got a few more cards so my typical monthly spending wouldn't be such a large percentage of my total CL.  :smileywink:


This is a good example of the importance of managing your balance to CL ratios. It can have a huge impact on scores. When your CL is high enough, you won't have to be as concerned about this as much.

 

Note, the recommendation of many to keep balances below 10% of CLs isn't an imaginary nor magic number... It is based upon FICO's scoring algorithim. According to FICO scoring expert and insider, Al Bingham, authori of The Road to 850, "Any reported balance above 10% of the credit limit is considered a high debt ratio to FICO. As this ratio increases, more pressure is applied to FICO scores... Any revolving account balance less than 10% of its high credit limit is the point where FICO will not penalize FICO scores. Anything above this ratio will drop FICO scores." The impact can be slight to substantial, so be especially attentive to accounts with smaller CLs (e.g., with a $300 CL, work to keep your reported balance below $30, either by charging less or making a payment in advance of your card's reporting date).

 


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