How Strategically Timing Your Credit Card Payments Could Increase Your Credit Score

Paying by the statement due date may not always be enough to get the best score.

There are several factors that go into determining your credit score. Your history of on-time payments is the most important, but your credit utilization ratio is a close second.

Your credit utilization ratio looks at how much of your total credit you’ve actually used. For example, if you had a credit card with a $1,000 limit and had charged $500 on it, your utilization ratio would be 50%. 

If your utilization ratio climbs too high -- above around 30% -- your credit score takes a hit, because of concerns you may be overextending yourself and borrowing too much. If your utilization ratio stays very low, on the other hand, this is a sign you can be responsible with your borrowing and show restraint when it comes to charging up your cards. 

You may assume that if you're paying off your balance in full, you're good to go on this issue and will boost your credit each month when your card issuer reports you've paid in full. But that's not necessarily the case. In fact, rather than just making your card payment by the deadline, you may need to strategically time it instead. Here's why. 

You may want to tweak the timing of your credit card payment

One thing that may come as a surprise to many cardholders is that your credit card company doesn't necessarily report your card balance after your payment is due and you've had an opportunity to bring your balance down to $0. In fact, your card issuer could report your balance to the credit reporting agencies at a very different time. 

Say for example that your payment is due on the 15th of every month and you pay down your balance on that day -- but the card issuer reports your current balance to the credit reporting agencies on the 12th. You might have a very high balance on the 12th because you'll have the charges incurred in your current billing cycle plus the charges from the prior month that you haven't yet paid off. 

If your high balance is reported on the 12th, that will be what is factored in when your credit utilization ratio is determined for purposes of your credit score. Even if you pay your balance in full or pay your card down to $0 within a few days, this won't really help with your credit score if you just charge a lot on your card again before the next time your card issuer reports.

How to strategically time your card payment

If you want to make sure your credit utilization ratio is as low as it can be, you should time your payment so you make it right before the card issuer reports your balance to the credit reporting agencies. 

You can ask your credit card company when it reports, or you can look at your credit report to see the balance reported and then check old credit card statements to calculate the date when you owed that much on your card. 

If you pay your bill before that date, you can maintain the type of low credit utilization ratio that will make you a much more attractive borrower or customer. It's worth the effort, since everyone from potential employers to auto insurers to lenders is going to take a look at your credit.