Does anyone know how a credit score increase is calculated based on paying off credit card balance(s)?

In addition, is it cumulative balance or just the balance at the end of a billing term?

For example, suppose your credit card has a limit of $10,000. Say you reach your limit before the end of the billing term and you pay it down by $9000. And then you spend another $8000 by the end of the billing term. So, effectively, you have spent $18,000 and when you pay it in full, it would be $17,000 "cumulative balance" and not just $8000, as shown at the end of the billing term. Would your credit score reflect having paid down $8000 (balance at end of billing term) or $17,000 (cumulative balance paid since last term)

3 Answers 3


Your credit score increases when you consistently pay on time.

As the months and years go by, the length of the credit history goes up which helps that sector of your score. The lack of negative reports in your history helps your payment history sector of your score.

According to myFICO:

Payment history (35%)

The first thing any lender wants to know is whether you've paid past credit accounts on time. This helps a lender figure out the amount of risk it will take on when extending credit. This is the most important factor in a FICO Score.

Be sure to keep your accounts in good standing to build a healthy history.

Length of credit history (15%)

In general, a longer credit history will increase your FICO Scores. However, even people who haven't been using credit for long may have high FICO Scores, depending on how the rest of their credit report looks.

You mention that you will by paying off part of the balance before the statement closes, and wonder what number is reported. The number is reported one time a month. You actually hope that based on the numbers you used in your example that they don't report the higher numbers you cite. That is because credit utilization is part of the score. And in this case a high utilization of revolving credit is bad. Lenders don't like customers that are flirting with their credit limits.

Again according to myFICO

Amounts owed on accounts determines 30% of a FICO® Score

FICO research has found that your level of debt is predictive of future credit performance because the amount owed typically impacts your ability to pay all monthly credit obligations on time. Not to worry if you have debt — it doesn't automatically make you a high-risk borrower. However, as your balances increase so does the probability of difficulty meeting monthly payments on time, but that's just part of what determines your credit score.

One of the parts of amounts owed it credit utilization of your credit cards.

Credit utilization ratio on revolving accounts

Your credit utilization ratio on revolving accounts-the percentage of your available credit you're using-is an important factor in your FICO Scores. Using a high percentage of your available credit means you're close to maxing out your credit cards, which can have a negative impact on your FICO Scores.

On the other hand, using a low percentage of your available credit can have a positive impact. In some cases, a low credit utilization ratio will have a more positive impact on your FICO Scores than not using any of your available credit at all.

It's also important to note that your current account balance isn't necessarily the balance that shows up on your credit report. Your account balance on your credit report will reflect the account balance your lender reported to the credit bureau (typically the balance from your latest monthly statement). So even if you pay your credit card balances in full each month, your account balance won't necessarily show on your credit report as $0.

The good news about the utilization part of the score is that it isn't sticky. If the next month the reported number is low, then that portion of the score calculation won't hurt you.

Added information about the reported balance.

Lets say you buy $100 of groceries every weekend. At the end of the first billing cycle you will have a balance of lets say $400 on the credit card, and you will have to pay that bill in 3 weeks. That will mean that by the time you pay the bill of $400, you will have bought groceries 3 more times and your balance will not be zero it will be $300. A week later when the second cycle closes the balance will be $400. The highest balance that could be reported is $700 just before you pay the bill, the lowest will be $300, but many will just report $400 because that is what you are billed.

In the situation described above you get points for using the card, and you don't lose points for being close to the limit. There is no benefit to your score to pay off the balance before they generate the bill, unless you are very close to the limit. But score wise that is only important for this cycle because that portion of score has no history.

There are other benefits to paying off the bill early if you are close to the limit, but that is due to wanting to have room in case of an emergency.

  • Okay so it's good to pay off your balance before the term is over?
    – ina
    Jul 2, 2020 at 22:48
  • But if it always shows 0 balance as you have paid it off already, is that a bad thing?
    – ina
    Jul 2, 2020 at 22:48
  • If it is always reported as zero it might look like it is never used. As the highlighted section pointed out zero can be worse than small. This is a mathematical model, and that is the way they developed it. Just pay the bill when it is due and you will be fine, because with regular use every few days or every week will mean it is never reported as zero. Jul 3, 2020 at 12:39
  • okay so the point is to leave a positive balance when the bill closing date is done. but to pay off the balance... my question was regarding whether i should pay off the balance immediately even before the closing date...
    – ina
    Jul 5, 2020 at 6:48
  • 1
    @ina: No, just pay the balance due on or before the due date. E.g. if you have a $100 balance on the closing date, and charge $50 between then and the due date, pay $100.
    – jamesqf
    Jul 5, 2020 at 17:20

The single most important factor in credit scoring is payment history whether or not you make all your payments on time. Your payment history contributes 35% out of 100 to your credit score.

If you are trying to establish a strong payment history, you can do so by making small purchases on your credit card and then pay the balance in full and on time each month.

It demonstrates that you consistently manage debt well, which can help increase your credit score.

  • i found that isn't fully true. i experimented with small amounts and paying it down. and then i racked up a big bill. and paying it down. all immediately. i found that there's no credit difference even if i am paying a card down several times a month. my score increased by over 30 points when i racked up a huge amount by one statement date. and then paid it down before the due date. also my score doesn't change much with paying down small balances.
    – ina
    Jul 17, 2020 at 21:09

Yes! Gradually the credit score increases as I have tried paying off my balance in full on time on my HDFC Credit card and it has worked for me.

The Vantage Score comes from the same place that FICO gets its information - the 3 major credit bureaus, Experian, Transunion, and Equifax but it weighs elements differently and there could be a slight difference in the two scores.

FICO uses 5 major components in the equation that produces your credit score. Those five include:

Payment History 35% Amounts Owed 30% Length of Credit History 15% Credit Mix 10% New Credit 10%

Any delinquency or inaccurate information can hold your credit report will not help in increase in your credit score.

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