If you’re looking to maximize your credit scores, you’ll want to know when to pay your credit cards so a lower balance is reported. Credit card companies report to the 3 Credit Reporting Agencies only once per month. So, to reduce your utilization ratio, pay your card balances down before that date.
Your Credit Cards Only Report Once Per Month
Knowing when a credit card company reports information to the Credit Reporting Agencies (CRAs) is critical to achieving higher credit scores. Many times, people think the balance of the account will be reported as zero because they’ve paid the full balance before their payment due date. The simple fact is the balance has already been reported to the CRAs by the time the monthly statement is sent to the customer.
Knowing Exactly Which Day of the Month Your Data is Reported
The monthly statement you receive from a credit card company is generated on the “month-a-versary” from the date you first opened the account. Let’s say you opened a credit card on June 13th, 2012. The monthly statement will always be produced on, or around, the 13th of each month. Your 30-day billing cycle starts on the 14th of the previous month and goes to the 13th of the current month. The end of the billing cycle is when the credit card company generates and sends you the monthly statement showing the outstanding balance, the amount due, and the due date. When you receive the bill, you’ll notice that the due date is set roughly 2-3 weeks after the end of the billing cycle – in order to give you enough time to pay before the due date. However, at this point the company has already reported your account data to the Credit Reporting Agencies. Remember, credit card companies report your account data on the day they produce the billing statement. So, if you want to have a lower balance on your credit report, you need to pay the account before the statement date. In the example above, this would be prior to the 13th of the month.
Why You Should Care
There are 3 reasons you’ll want to be aware of this info: (1) the balances on your revolving accounts affect your utilization ratio – which has a big impact on your scores; (2) the balances on newer accounts have a big impact on your scores; and (3) if your credit card account shows a balance, then the minimum payment that’s due will be reported on your credit report. If you’re trying to get mortgage financing, the minimum payment amount is factored into your Debt-to-Income ratio. The minimum payment is viewed as a monthly expense and it means you won’t be able to buy as an expensive of a house.