How paying more than the minimum helps build credit


Credit Wise
Credit Wise columnist Kevin Weeks
With more than 20 years experience in the nonprofit credit counseling industry, Kevin Weeks joined the Financial Counseling Association of America (, @TrustFCAA) as its president Dec. 1, 2014. Weeks has extensive knowledge of both the credit counseling industry and the FCAA organization, having served in leadership positions for three of its member agencies and on the FCAA board of directors. In addition, Weeks is working with FCAA members to help develop a long-term solution to the student loan crisis through the website Weeks holds a bachelor of science degree in business administration, management information systems from Salem State University.

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Dear Credit Wise,
By paying more than the minimum payment due, will it affect building credit? -- Brandon


Dear Brandon,
The answer to your question is, yes. Paying more than the minimum definitely will affect your credit, in a good way, and it's more important than ever.

I love to hear about consumers who want to pay more than the minimum amount due.  Paying more than the minimum is good not only for your credit, but for your entire financial well-being.

First, let me explain how paying more than the minimum affects your credit score.

Credit scoring models look at your on-time payment history, how much of your available credit you have used, the age of your accounts, new accounts acquired and credit inquiries, among other things. The first two -- payment history and credit utilization -- are by far the most important factors in your score. The other things count, too, but not nearly as much.

Of primary importance to your credit score is making your payments on time, every time. It is the first thing I recommend for getting to and keeping a good credit score.

But credit utilization -- which is how much of your available credit you have accessed -- isn't far behind in its importance to your score. The more of your total available credit you consume by borrowing, the worse your score will be. The closer you get to maxing out that card, the more that factor will play into your score, even though you may be making your payments faithfully and on time.

Paying more than the minimum is also the only way to pay off your debts, and that's become a more-important factor in your score due to changes made to credit scoring formulas in the past few years. In 2013, some credit scoring formulas began including "trended credit data" -- essentially, your payment habits. Being a revolver (someone who routinely carries a credit card balance) hurts your chances of getting a loan at the best terms, while being a transactor (someone who routinely pays off balances) helps them.

For all these reasons, it's a good idea to pay more than the minimum amount due to your creditors. You want to get to the point where you have as much of your credit available to you as you can. 

If you have been reading my columns, you probably know what I am going to say next.  I want you to get to the point where you aren't just paying the minimum amount due, or even more than the minimum amount due. I want you to pay the entire balance off each month.  Doing so will be great for your credit score, but as I alluded to earlier, it is even more important for your financial health overall. If you can get to the point where you only charge what you can pay off each month, you will never have to worry about credit card debt overwhelming you because you are living within your means. That is a wonderful feeling and it is my hope that you can get there.

Be wise with your credit!

See related: The FICO 5: Breaking down the elements of the FICO score

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Published: October 24, 2015

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