One of our readers, timtribble, had this question:

Reader Question: Which is better for my credit score; paying off my balance before the end of the month (meaning I get a bill with a zero balance), or paying off my balance each month after I receive the bill (and all the months charges are posted).

NOTE: I’m on a special student card that gives me 0% ARP for balances under $250 with a $750 limit, so staying under $250 keeps me under 30%. What I’m saying is I pay the same amount whether I pay before the bill or after, so I just want to know which is best for my building my score.
Thanks
–timtribble

Thanks for your question Tim! I do not *believe* it will make any difference to your score whether you pay the balance before the bill is issued or not. I say this because most credit card companies will report how much you charged on the card that month even if you paid it before they issued you an official statement.

The statement is simply saying that you already paid what you charged that month so you owe nothing. There is a real possibility that that could vary from company to company though. Since I don’t know which card you are using, I cannot say for sure.

The real proof can be found in your credit report. Continue paying the bill before the statement is issued for a couple of months. Then get a free copy of all three of your credit reports here. A quick glance at your records for that card will show you whether or not they are reporting the amount you charge each month, or the amount due on the statement.

If you really want to raise your credit score, just keep doing what you are doing – paying that balance off each month on time (or early!).

The people who have the highest credit scores (Over 800) typically charge no more than 10% of their available balances. You may find that reducing the amount you charge each month will help your score go up.

You should also check your credit reports thoroughly for any bad information. I have seen estimates that say as many as 70 percent of credit reports have errors. If yours does have bad information then you can challenge it and that will raise your score. You can do all of that online for free if you need to.

Thanks for your question. I am sorry that I could not give you a more definite answer. Once you check your reports will you come back and let us know how it turned out? I would really love to know!

Thanks,
Jenna

This entry was posted on Friday, July 25th, 2008 at 11:18 and is filed under Reader's FAQ. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.