Pay credit cards early for the best credit score.
This is an excerpt from my presentation from the Building Michigan Communities Conference. I am talking about how you should never pay your bills on time for a great credit score and When to pay your credit cards early for the best credit score.
The date when the creditor sends the information to the repository that is the reporting date. When the consumer looks at their credit statement online they will have all the current charges listed in date order for the month. Then one day the consumer logins and the current charges are all gone. There will be no current charges. That is the reporting date. It is the date consumer’s credit information goes from the credit card company to the repositories (TransUnion, Equifax, Experian), consumers should strive to have their credit card balances at a five to nine percent balance on the reporting date. If they do that they will get the most possible points from that credit card account. If you want to then pay the reporting date in full that is the time to do it. That is why I say “never pay your credit card balances on the due date for the best credit score.” Consumers should always pay before the reporting date.
If your credit card balance is due on the thirteenth of the month and you charge purchases just prior to that your reported balance will be higher than normal and your credit score will suffer.
Let’s say you pay off your credit cards every month and you charge purchases right up to your high balance every month. If consumers wait to make the payment until the due date their score will be lower because of the higher reported balance. If consumers make their payment before their reporting/statement date they will have higher scores for the entire month because that information is only reported once a month. This is how you take advantage of that, consumers should pay their balances before the reporting/statement date.
How do you know what the reporting date is? Have consumers log into their account every day for a month and go to current activity. They will watch the current activity, as the month goes by, the transaction list will get longer and longer. Then the one day it will be zero. The day before that date is the reporting day or statement date.
The three major repositories in the olden days collected the data from the credit card companies using large magnetic tapes. the credit card companies would put all the consumers’ information for the month on the tapes. The tapes would be sent pony express to the repositories.
The repository took that information and added it into the main repository database. The date when they took the consumers account history and added it to the main repository database that is the reporting date. That is the date when the information goes from Visa to Equifax.
So if consumers can get their balances down to five to nine percent the day before the reporting date they will get the most point from the FICO® scoring model.
If consumers pay on the due date let’s say July 13th and the reporting date is July 4th. If consumers get their balance down on the third and the balance is reported on the fourth. They could then pay the rest off on the due date, if that is important to them. Thank you everyone for coming out and I would like to thank MSHDA for asking me to present today. Pay credit cards early for the best credit score.
If you want to see more videos about credit and credit scoring check these out at www.thecreditguy.tv. If you are a mortgage lender please share this on your Facebook or LinkedIn page. If you have any questions, leave them down below I’d be happy to answer them.
Go to www.getloanready.com to find other ways to improve your credit score. I’m Dave Sullivan here for the credit guy TV so you with a little bit me we’re going to change the credit industry thank you