Does paying off my credit balance before the due date for a lower utilization rate hurt my score?

Question

Last month I opened a cash rewards credit card with Bank of America. I am worried about my credit score, as my first closing date was the end of September. I paid off the balance that I used a couple of days before the closing date and left the balance at a 5% utilization rate.

In doing that, I thought it would help my credit. I just checked my credit score and I was disappointed to find that my score is 660. Did I do something wrong? Should I not pay off the balance before the closing date to a small utilization amount? Does that negatively affect my credit score?

Also, my payment due date is 10/20/2018, but my closing date is 10/23/2018. I thought the closing date came first and then I would have time to pay off the balance. Why is my payment date before the closing date? And how would that affect my utilization percentage?

Answer 1

Did I do something wrong? Should I not pay off the balance before the closing date to a small utilization amount? Does that negatively affect my credit score?

Many people say the ideal utilization rate is ~10% and most agree that it should be kept under 30%. Typically the balance would be reported to credit bureaus on your statement closing date, so paying some off early will keep your utilization down. If you're trying to build your score, it could be worthwhile to make early payments to keep it around 10% at statement closing date (0% utilization is also not ideal). Likely your relatively low score is just due to your lack of credit history, as you said it's the first time you've checked, you have no baseline, make consistent on-time payments and keep the utilization reasonable and watch your score climb over time. Also check for any fraudulent negative items on your credit report.

Whatever you do, don't have any late payments, and pay off your statement balance before each payment due date.

Also, my payment due date is 10/20/2018, but my closing date is 10/23/2018. I thought the closing date came first and then I would have time to pay off the balance. Why is my payment date before the closing date? And how would that affect my utilization percentage?

The payment is for the prior period, the statement likely shows that the payment due on 10/20 is for card activity through 9/23. This shouldn't really have bearing on utilization, since utilization is based on outstanding balance at each point in time when it is reported, so as long as your payments are timely they will be recorded before the next closing date.