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Paul Yamilkoski

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Is Paying Your Credit Card Bill At The End Of The Month Really A Good Thing?

Credit card debt and how we handle our credit pair payments is a big factor in our credit scores. About 98% of all the clients I have worked with have been in need of at least a little coaching on how to properly handle their cards. I’m sure it would not surprise any of you to know that almost 100% of clients, that already have credit cards, think that they know the right way to use them.
The interesting thing is that most of those clients benefit from making some changes to what they think is so right. Some clients think you are supposed to spend lots on your cards each month or use them many times each month to get the most benefit. That is incorrect. In fact that kind of behavior can crush your credit.

Just so you know, one use of the card, for even a tiny purchase such as a soda, is more than enough activity to help you. More use gains you nothing on your credit, and can create a problem for you, if not careful.

Anyway, back to those clients that I work with and how they use their cards. Many of those clients tell me that they pay on their cards or pay off their cards at the end of each month, so there is nothing to worry about. That is the thing I want to caution you about today. I would like to help you see the flaw in that line of thinking.

During a conversation with one of my clients, he proceeded to let me know that his cards get paid fully on the last day of the month. They are never paid late and he thinks he is doing everything perfectly.

So, I asked him what day of the month that each of his cards report to the credit bureaus. He was a little confused by that. He thought the balances got updated every time he made a payment or used the card. The reality is that credit cards generally only get reported to the bureaus one day each month. When, will vary from company to company and client to client. I have seen the same card company report on different days for different customers.

That didn’t seem to matter to him at first . So I posed this scenario to him. Let’s say you use your cards heavily during the month and pay them off fully on the 30th. Now, let’s also assume that all the cards report to the bureaus on the 25th. What the bureaus are going to see and score, is a near max balance. When it comes to credit scores, your balance to limit ratios make up 30% of your credit score, all by themselves. When the bureaus see a high balance, they assess that as high risk, because you are using a lot of money you don’t seem to have, or you would have paid cash. The result is your credit score gets crushed. In fact, if this pattern is repeated every month, the bureaus will never see the balance pay down.  images.jpg

Now consider what happens if the cards were paid prior to the reporting date in this scenario, so that the payments cleared the account a couple of business days prior to the 25th. The result is the balance is zero on the day the cards get reported to the bureaus. They, the bureaus, assess that as very responsible behavior and instead of losing a ton of points, you get positive points on your credit.

The difference of a matter of days can make a huge difference in your credit scores. In fact, I had a client that saw a 120 point swing in his scores, by paying his cards down to about 4% of limit from near max. It can matter that much.  images.jpg

Not everyone will see that dramatic of a swing in their scores, but it will make a big difference.

So there you have it. Paying on your credit cards or paying your credit cards off at the end of each month is not necessarily a good thing for your credit. There is more to the equation than that. Sometimes timing is everything.

I welcome your comments and ask that you share this information with all your contacts on social media. We at Heartland Credit Restoration are all about helping people get positive control over their credit, and the more people that know this kind of information, the better.

If you are facing credit challenges, or you have a client that you are going to have to turn away due to credit challenges, then I encourage you to give me a call. We can look at how Heartland Credit Restoration might be able to help you turn things around and get that credit loan ready. There isn’t a better company you can go to for help. I will look forward to talking to you and I hope you have a wonderfully blessed day!

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