To all you consumers who pay your credit card balances in full every month; good for you!
Not carrying a balance on a credit card is one of the best financial maneuvers you can make for yourself. This ensures that you won’t rack up expensive finance charges, nor will you find yourself deep in credit card debt.
if you are using your credit cards, your credit report may still show a balance, even if you pay it in full.
The answer is simple. Creditors only report and bureaus (Experian, Transunion, and Equifax) only update your accounts once a month, but not necessarily on the first of the month.
You charge $2000 on your Visa. The bureaus may have updated their records on the 25th. You pay it in full on the 1st of the month. If you pulled your credit report before the bureaus updated again, the $2000 balance would show up on your credit report and impact your credit score.
Now remember, balances make up 30% of your credit score, so this little process could cost you lots of points if you don’t manage it beforehand.
Here are 3 points to remember:
-know your limit. Your credit card limit is an important piece of knowledge when managing your credit score. Be sure you are aware of the limit of each and every credit card in your possession.
-keep the ratio low. Never at any time charge more than 30% of your credit card limit. This is known as ‘credit utilization’. If you have a Mastercard with a $10,000 limit, never at any time should you have a balance greater than $3,000. Charging more than this could decrease your credit score. If you need to charge more than 30% throughout the month, it is better to increase your credit limit or charge it on more than one credit card, thereby keeping the credit utilization low.
-remember there is no way to know when creditors report to the bureaus. Creditors send their consumer information to the bureaus at different times throughout the month, so there is no set time that your credit report will ‘update’.
Paying your credit card balance in full every month is fabulous for your financial (and mental) health. Taking these extra steps and managing your balances throughout the month will help you greatly in maintaining the very best credit score available to you.