Reader Question: Can paying credit cards early boost your credit score?

Welcome back from your 4th of July vacations! Over the holiday weekend, we received a great question from Nikki about credit scores:

My father-in-law says that making your credit card payments early helps improve your credit score. I disagree with him and say that paying early could help you avoid late payments, which can be damage your score. However, just making payments early would not have a positive impact on your score on its own. Who is right?!

We love settling bets here at CreditBloggers.com! In this situation, Nikki is correct!  Making credit card payments early is a great way to manage your debts and avoid finance charges, but it doesn't do anything extra to help your credit scores.

Credit reports only have a few payment options available: unknown (when the creditor hasn't reported your status), current, 30-days late, 60-days late, 90-days late, etc. Here's a sample of TransUnion's payment categories. 

An early payment would simply be reported as "current" and wouldn't give your credit score an extra boost. Basically as long as you get your payment in on time, your account will be reported as "current" and you credit report will remain clear.

Next question? Send us your questions and family disputes by email or share them in the comments section below.

Comments

[Nick]

Maybe Nikki's father-in-law was talking about the credit score increase that comes from having a lower balance. If my usual credit card due date is the 20th of the month, and my credit card company reports my new balance on the 15th, if I pay on the 20th, all of that balance shows up on my credit report and increases my overall loan-to-credit-line ratio. If I pay on the 10th, my balance reported to the credit reporting agencies will reflect that latest payment and might bump my ratio down another notch, driving my score up a few points. Or am I way off here?

[EmilyPeters]

Good point Nick. It's true that you could make your credit balances appear lower that way.

[Liz S.]

I was going to say exactly what Nick said. For a while, I was paying my credit cards when I would use them rather than when the payment came in. My bills were $0 and my credit reports reflected $0. I noticed that when I stopped doing that, my credit reports reflected the balance that was on my statements rather than the $0, even though I'd pay them in full every month.

That would lower the used credit ratios and that should help, especially if you charge a lot over the course of a month and pay in full every month.

Especially if that's your only card, I can definitely see that helping your score.

[EmilyPeters]

Be careful with this method though. Not having any balance on your credit cards can sometimes have a negative impact on your credit scores. A long period of no balances can make it look like you're not using your card. This could lead to a reduction in your score due to a lack of positive reporting.

[Liz S.]

I did it for about 4-6 months and the odd thing is that all of the credit reporting agencies listed my low balance utilization as a good thing. One even said that "You have 0% utilization" under the "this is why your score is good" section.

So I guess a few months of it is ok and good, but maybe a few years isn't. It's very confusing as to where the cutoff point of good vs. not good is.

I have a 12-year credit history, though, so maybe it's a detriment to people who have only a few years. I'm guessing there.

[EmilyPeters]

It's such a confusing system! In my experience, the best plan is to use your credit cards regularly, carrying a small balance most of the time. A few months before you want to buy a home or take out a big loan, reduce your balances to $0 and you'll get the boost you need.

[mo]

we had 3 or4 credit cards
with high limits we payed them off but and it lowered our scores after that we could not use the cards because our scores where to low and company said because we did not owe a balance they would not extend us credit
now we only have one card with small limit they did not post the payment and we had 70 point reduction now they will not remove the late this has made it harder to qualify for a home loan

[EmilyPeters]

Mo, it sounds like you closed the accounts after you paid them off. This is a really common mistake and often leads to serious credit problems. You may want to open another credit card and work on re-establishing your credit.