If I pay my credit card balance immediately, will my credit score still go up fast?

Question

I heard that it's good to have a balance because then the bureaus report that balance -- if you pay it off before they report it, they report zero.

Since you want the bureaus to know that you use credit because that's how your credit score increases, should I pay the balance as soon as possible or wait as long as I can before

I have searched far and wide and I am confused in what I should do here.

I want my score to increase the best and fastest way possible, but the concerns I have are not with utilization -- they are with when I should pay and how that will affect my score based on if the bureaus see any credit use or not if I may be paying too soon.

To make this very clear, I want to know if the credit utilization will still be reported if I pay my bill as soon as possible, because I want my credit use to be known -- I don't want the reported credit use to be zero if I am using credit and paying it off if before it is sent to the bureaus.

If this doesn't make sense, I'm sorry -- I can't think of any other way to word it. I want my credit use to be known to the bureaus basically, and I am worried that if I pay too soon they won't know I used any (when I did). Is there any definite, clear answer to my concerns?

Answer 1

Having a balance on a card is not a positive thing in your credit score. The balance goes towards utilization, and higher utilization is a bad thing for your score. See What's In Your Score for more information on exactly what goes into the score. Lenders separately report that you have a good payment history with them, so you don't have to show a balance on each month to get that positive.

Now, not all lenders use the score itself to determine what they approve or offer; that's where you've probably heard that you should have some usage. This tends to be used most commonly for credit limit increases; obviously the credit card company itself knows that you've been using the card. Some also will give you higher limits (or more cards) if you carry a balance but pay regularly and don't have too high utilization - that's because you're a higher profit customer, presumably.

This doesn't directly impact your score, though, and it won't impact the big things like mortgages or car loans. Those are based on other things, and will appreciate that you never carry a balance.

Finally, as to the direct question: Each lender has a different policy, and you'll have to either ask them or find out by trial and error. If you have a card that includes a free credit report on demand (like Discover for example), you can easily do that. Some lenders report at a specific time each month, some report the balance on your statement, some report sporadically.

Answer 2

Utilization is sometimes averaged. Even if you pay your credit card in full one week before the due date you may have utilization reported. Modest utilization is not likely to have a major impact.

Building your credit score takes time. Even if you are very responsible credit card user, lifespan of accounts may hold you back from the most desirable score range. A note about missed payments, some companies do not report a missed payment until you are 60 or 90 days past due and it is common for a credit card company to reverse the late fee and possibly interest as a courtesy to their best customers if you have a strong payment record and it is your first missed payment in 12 months.

If you have big plans for credit, know the credit score is one factor in determining your credit worthiness. Free Cash flow and Assets are two other important factors which may be as important or more so than the score.