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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?

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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.

  • Do you know how long (on average) it would take for my score to go up, say 750+, if I pay on time, and even pay early so that my utilization percentage at the closing date is ~10%? – Justin Oct 4 '18 at 23:55
  • Your credit score continues to increase over a period of years, as you establish on-time payment history and increase average age of credit. – prl Oct 4 '18 at 23:59
  • @Fattie No that's not what this means, keeping utilization at 10% doesn't mean you carry a balance from month to month, as I mention you pay off your statement balance before each payment due date, but to keep 10% you pay off some of your current statement balance before the period even ends. No interest paid. Example: $1000 limit, I spent $500. Period ends in 5 days, bill for that $500 would be due in 35 days. If I pay $400 now, my utilization gets reported at 10%, if I pay nothing now it's reported at 50%. In either case, so long as I pay the full $500 by the bill due date I pay no interest. – Hart CO Oct 5 '18 at 16:37
  • Ah , sorry to use your time. Thanks for the explanation! @HartCO – Fattie Oct 5 '18 at 16:39

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