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Did you know this about your credit score???

 

 

 

 

 

 

Are you trying to improve your credit score? Are you looking for additional tips on how to maintain a healthy credit score? This will be a very useful tip for you and is one of the most frequently addressed questions within our credit repair program that is offered to our buyers FREE of charge.

Why can full utilization of a single credit card or multiple credit cards severely impact credit scores when the individual pays their bill or bills in full every month when the statement comes? 

To start this discussion, it is important to know that a credit report is not processed in real time.  With that being said, all of the credit card companies and banks generally report one time every month.  The date that they report to the credit bureaus can be anytime during the month, but it is generally towards the beginning or the end of each month.

For example, let’s say you have a credit card with a limit of $1000.  Your statement for this credit card comes on the 23rd of every month and you write out a check for the full balance due.  You would think by paying the balance in full, everything is great! Right? Not necessarily. Let’s just pretend that your credit card company reports to the credit bureaus on the 20th of every month. In this particular example, because you paid the balance after the credit card company reported to the credit bureaus, you would be carrying a very high balance.  By the 20th of every month you have probably come close to maxing out your card with intentions to pay this balance on the 23rd of the month.

Since a credit report is not updated in real time, this would show a balance on your report for 30 days or until it is reported the following month.  If it is the same situation the following month you will show a high balance on your card for another 30 days. This can be very harmful to an individual’s credit report since 30% of your score is derived from your credit card balance utilization.  If you are constantly carrying balances on your cards, then you can be hurting your credit, even if you pay them in full every month when your statement comes.

Let’s take that same example above with a few changes.  Let’s say this card has a $1000 limit, and you come close to the limit every month just as stated above.  The statement comes on the 23rd of every month and you pay it in full.  Let’s also say that your credit card company reports your balance on the 29th of every month.  If this is the case, then you would most likely be carrying a very small balance if any because it has only been a few days since you paid this card in full.

In both examples, it would seem as if you weren’t doing anything different, but because the credit card company is reporting at different times, the results are dramatically different. In the first example you would be hurting your credit score and in the second example your score would not be hurt.

In order to resolve this issue we suggest to our clients to always keep all of their credit cards below 30% of their available limits.  If you always keep your balances below 30% of the limit then it doesn’t matter when the credit card companies report to the credit bureaus because you will never be carrying a high balance.  For those wanting to use more of their limits, we recommend making a payment every week so that you maintain a low balance on your card.

To get a free copy of your credit report annually, you may visit annualcreditreport.com.

For additional information on our FREE credit repair program, please visit one of our community models to speak with one of our community specialist. We would be happy to help you with any questions that you might have.

And as always you can follow us on Facebook and Twitter.

About Art Browning

Art is a Division Coordinator for Maronda Homes in Columbus Ohio. He currently resides in Galloway Ohio with his wife Jody and three wonderful kids Kyle, Kayla, and Kameron. Outside the office he enjoys camping and gardening.

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