Best Day To Pay Credit Cards To Boost Credit Score 2023

hey i'm adam jusko from proudmoney.com in this video we are going to look again at the best day to pay your credit cards if you want to boost your credit score maximize it to the very last point you could possibly get but before we do that i'm going to ask you to please subscribe to this youtube channel if you have not already and if you have already i thank you for doing so so we have tackled this topic before but the same questions always come up some points of confusion so in this video i'm hoping to get it all together into one perfect video that is going to answer everything that you want to know so if you want to maximize your credit score one thing you can do when it comes to making credit card payments is you can time those payments so that it always shows up on your credit reports that you are carrying a low balance which is going to help you maximize your credit score make you look like a very responsible credit card user which i'm sure you are one of the important pieces when it comes to calculating your credit score is something called credit utilization and credit utilization is simply the percentage of your available credit that you are currently using so if you have a credit card with a three thousand dollar credit limit and you have twelve hundred dollars worth of purchases on that credit card well then you are using forty percent of the available credit your credit utilization ratio is 40 now in terms of maximizing your credit score 40 is considered a little high oftentimes you're going to see reports where they talk about 30 being a credit utilization that you want to stay under but if you're really trying to maximize your credit score it is really better to get yourself under 10 in terms of credit utilization sometimes people say 9 but i think 10 is a lot easier to remember and it is going to do pretty much the same job so we want a standard ten percent as a credit utilization ratio and if you have a credit card or credit cards where you have twenty thousand dollars of available credit for a lot of people it's gonna be fairly easy to stay under that ten percent but if you're someone that has lower credit limits if you have a one card and it's only got a thousand dollar credit limit well then 10 percent is only 100 so it becomes a lot more difficult to stay under 10 now you can make just multiple payments over the month if you want to in order to stay under that 10 so every time you make a purchase if you go over 10 make a little payment to get yourself back under again but that's kind of a hassle and so the other option which is probably preferable for most people and it's where the best day to pay comes in is to pay down your credit card balance to less than 10 of the available credit right before that balance gets reported by your credit card company to the credit bureaus so you don't pay it off completely at least not yet but you get it down below 10 let it report to the credit reporting bureaus and then you pay it off so that means we're actually talking about making two payments one right before the card reports to the credit reporting bureaus and then one before the due date now how do you know when your credit card is going to report to the credit reporting bureaus in most cases but not all it is going to be at the end of a billing cycle so when there is that cut date the statement date the closing date those are all sort of interchangeable terms when a billing cycle ends most credit card companies are going to take your balance at the end of that billing cycle which is going to be the amount that you owe when the bill is due and they are going to report that as your balance and that's what the credit reporting agencies are going to get using a recent credit card statement of my own you can see that i have a balance of three thousand nine hundred and seventy five dollars the total credit limit on that card is thirty thousand dollars there is a billing cycle shown that ends on february 18th so that is the end of the billing cycle sometimes you would call that the cut date or it might be the statement date the closing date is when one billing cycle ends and then the on the next day the next billing cycle is going to begin so i can look and see that that three thousand 3975 dollars was actually what was reported to the credit reporting bureaus for that month so transunion equifax experian they all got that so that shows that for this particular credit card they take that closing date and that is what is reported to the credit reporting bureaus by the way for this video i am using my fico which is a paid product i'm not endorsing it here there are other things on the market where you can check your credit reports to see what was actually reported to the credit reporting bureaus you can get free credit reports from annualcreditreport.com every year you can get one free repo free report from each of the credit reporting bureaus one time per year so there are other ways to check this as well this is just something where i got a freebie and so i'm going to use it so that last day of the billing cycle whatever that balance is is usually what is going to get reported to the credit reporting bureaus but not always it is possible that you have a credit card that is going to report on a different date sometimes they report on the first of the month and it's possible other dates as well so if you have any question about a particular credit card you could call up the credit card company customer service reps aren't always going to know what that answer is and they might not even know what you're talking about so you might have to do a little backtracking a little investigation to actually check your credit report against the balances that you actually had on your card to see what corresponds to what so once you've had a credit card for a couple months or more you will be able to start predicting maybe for sure maybe within a day or two what the end of the next billing cycle is going to be sometimes it is a fixed date sometimes it is going to vary slightly but it is always going to be about 28 to 31 days from when the last billing cycle ended so you can reasonably predict when the next one is going to come so maybe two or three days before you think it is going to end you can go in go online and make a payment to get yourself under that 10 percent so the credit utilization that is reported to the credit reporting bureaus is under 10 now using my example i had a 3975 dollar balance 30 000 credit limit that means i'm over the 10 so if i wanted to i could have gone in a few days before that billing period ended and say make a payment of 1 dollars to bring that balance to 29.75 which would then get me under 10 as far as utilization goes and have that reported to the credit reporting bureaus instead so in short the best day to pay is the day right before your balance is going to get reported to the credit reporting bureaus but that's not the only aspect to this because and this is very important with this method we are actually making two payments we're making a payment right before the end of the billing cycle to get under 10 of the available credit on that card but we still do have a balance after that and so we're going to pay the rest of that balance before the due date there is no reason that you have to carry a balance from month to month and pay interest in order to do this all you're doing is essentially taking the payment that you would make to pay off the whole balance and you're paying part of it before it reports to the credit reporting bureaus and the rest of it after it has reported to the credit reporting bureau so again using my example if i had a 39.75 balance and i paid a thousand dollars before the end of the billing cycle to get it down to 2975 well then i would pay that remaining 2975 before the due date so i still paid the 39.75 i just paid it in two chunks 1000 before the end of the billing cycle the 27.95 after the end of the billing cycle but before the due date and just to reiterate in my example february 18th was the end of that billing cycle i could have gone in on maybe february 16th and paid that thousand dollars but then i have a due date that is march 15th for the remainder so anytime before that march 15th i then could pay the remainder that 29.75 that i still owed so that is the methodology and i will get to some of those common questions points of confusion in a moment but i want to say here that it is not important for you to do this at all for most people this is a method to try to wring out every possible point you can get out of your credit score for a lot of us it's totally not necessary to do this especially if we have a longer credit history and especially if we have a higher credit score it's not going to make a whole lot of difference if we wring out every point or not when would you want to do this method well if you were going after a mortgage perhaps or an auto loan or even a new credit card and you wanted your credit score to be as high as possible so that you would get approved and you would get the best possible rates for your credit history well then sure you are going to want to make yourself look as good as possible to a future lender someone that you are asking for money from the other time i would say that maybe you would do it is if you have a very low credit score and maybe you're a little worried that if it shows too high of a balance and your credit score isn't you know really kind of going up that maybe the credit card or credit cards that you have might even lower your credit limit or maybe they would close your accounts altogether and so you always want to look good to the lenders that have given you a chance as you are rebuilding your credit or maybe even building for the first time so maybe you're a little wary of having too high of a balance on your cards and so you might do it then as well right now let me address the two questions that always come up when i talk about this and the first one is why make a payment to get yourself under 10 but leave a balance and then make another payment before the due date why not just pay off everything right after you make the purchase or go in right before the end of the billing cycle and pay it down to zero so you don't have to worry about it anymore and it is going to report as zero isn't zero better than five percent or seven percent or nine percent credit utilization and the answer is no because when it comes to your credit score in truth your credit score is a way to gauge how you use credit and if every time a credit card reports to the credit reporting bureaus the balance is zero it is going to look to any other lenders who might look at your credit report in the future like you got a credit card but you never actually used it and if they are going to be loaning you money or giving you a credit card those other companies are not going to know whether you were approved for a credit card and then never touched it they are going to want to know how you actually used the credit that you were given so if you look at a credit report and you can see that the card was used at different times and it was always kept under a 10 utilization or maybe a 20 or 30 percent utilization well then you can see that this is a person that not only was able to get credit but they were someone that could use the credit and use it responsibly they could pay on time they could keep their balances to a reasonable level they didn't do anything crazy where if they just were able to get a credit card but they never used it again well then you don't really know how they handle credit you only know that they know how to take a credit card and put it in the freezer or in a desk drawer or whatever and never touch it so the whole goal of a credit score is to understand how you actually use credit and so you do want to have something actually reported to the credit reporting bureaus so that future lenders can see that you've actually used credit not just had credit but again and i cannot say this enough i am not saying that you should carry a balance from month to month on a credit card i am only saying to keep that utilization low let something report to the credit reporting bureaus and then pay it off in full you don't ever have to pay interest in order to increase your credit score you're only hurting yourself by doing so and then there is the final question the one that comes up over and over again that i answer over and over again and i must never quite be doing a good enough job or people wouldn't keep asking it and that is well what if my due date is before the statement closing date like i have a due date on the 11th of the month but my statement closing date is the 15th how am i going to pay down under 10 percent before the statement closing date if my due date was earlier and the answer is you're never going to have a due date that comes before the statement closing date that would be like going into a store and having them charge you before they know what you are going to buy the credit card company has to see what you have bought and then bill you and give you a due date into the future so in my example when i showed you my statement i had a billing cycle that ended on february 18th and the due date was on march 15th so here's why you might get confused and think that a due date is before the end of a billing cycle or before that end date and it is because often times the due date and the end of a billing cycle can be very close together but that due date corresponds to a previous billing cycle while that billing cycle end date is for the next billing cycle after the one that you had a due date for so using my credit card statement it might be a little more clear so i already showed you that i had a credit card statement with a billing cycle that ended on february 18th and a due date of march 15th which makes sense february 18th is long before march 15th gives me some time to pay it and to send me the bill all that good stuff right but if the billing cycle ended on february 18th that means a new billing cycle started on february 19th so while there's that little period between that first billing cycle and me actually making the payment there was a billing cycle happening for the next period so i got a due date of march 15th but all of a sudden on march 21st there is that second billing cycle that has just ended as well so if i'm looking at it with a certain frame of reference i'm going to say my due dates march 15th the end of the billing cycle is march 21st but that march 15 due date corresponds to that billing cycle that ended on february 18th and so that end of the next billing cycle on march 21st has nothing to do with that earlier billing cycle and has nothing to do with that march 15th due date so your due date may be coming before a end of a billing cycle but it's not coming before the end of that same billing cycle so you have a pass billing cycle you have a due date and then you have a new billing cycle and a new due date coming in the future and in my case you can see that that next billing cycle that ended on march 21st the due date for that is april 15th it's not the due date that came right before it so did i do a better job of explaining it this time if not or if yes or if you have other questions put them in that comment section below otherwise i thank you for watching and as always please go to proudmoney.com where we do credit card reviews we talk personal finance we talk deals and all sorts of other fun stuff too you don't want to do any of that stuff watch this video

Channel: ProudMoney - Credit Cards & Personal Finance

Views: 428,884

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Id: rC1pIooSWr4

Length: 15min 23sec (923 seconds)

Published: Thu Apr 21 2022