How multiple card payments raise credit scores
To Her Credit
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Steward Radio and other programs. See her website SallyHerigstad.com
for more personal finance tips and free budgeting worksheets.
Ask Sally a question
, or read her previous answers in the To Her Credit archive
Dear To Her Credit,
Is it better to make a one-time monthly payment on a credit
card or several payments during the month? I'm looking for ways to raise my credit
score. -- Deborah
Making more than one payment in the month can indeed help
raise your score.
Some people assume that if they pay their balance off every
month, their credit report should show a zero balance. Unfortunately, your
credit history will show the current balance on the day the credit card company
reports to the credit bureau. You have no control over when in the billing
cycle this "snapshot" will be taken -- it could be the day before you pay your balance in full or
the day after or sometime in between.
Credit shows how much you owe, and whether you make your
payments on time. A significant part of your credit score (30 percent) is based
on your credit utilization -- the amount of your available credit that you have
used relative to your available credit. That's why even a temporarily higher
balance can lower your score.
One solution, as you suggest, is to make more than one
payment per month to keep the balance low at all times. If you use your credit
card a lot every month, you could schedule a payment of about half your monthly
spending using online bill payment. When your bill comes, you just pay the
Another method is to send a payment immediately when you
make a major purchase, such as airline tickets. This is a good idea if you want
to keep your score as high as possible; for example, when you may be applying
for a home loan.
I have a couple more reasons for when I like to send a
payment immediately after making a large purchase. If a purchase puts me too
close to my credit limit, paying it off keeps me from ever bumping up against it
it and incurring an over-limit fee. In addition, paying off the card
immediately helps me keep track of where I stand financially. Once I've bought
something, it feels more like I've really spent the money when it leaves my
I've heard of people who take the multiple payments idea to
extremes, sending electronic payments as often as every day. They say it keeps
them focused on paying off debt. Unless you get paid every day, however, I
don't see a benefit to sending payments that often.
Besides helping your credit
score, another benefit from making multiple payments is that you can save on
interest expenses if you carry a balance. Credit card companies calculate
interest expense by the day, so the faster you get your payment in, the more
interest you save. If you can, make your biggest payment early in the month.
The savings in interest charges will add up and help you pay off those balances
Before you start making more payments, make sure your online
billpay service doesn't charge you extra for more payments. Extra fees could
offset any benefit.
When you're getting ready to apply for a loan or for some
other reason you need the highest score possible, every point counts. Keeping
that balance low all month is one smart way to take care of your credit!
See related: FICO's 5 factors: The components of a FICO credit score
Meet CreditCards.com's reader Q&A experts
Vexed by a personal finance problem? CreditCards.com's Q&A experts answer questions from readers every weekday. Ask a question, or click on any expert to see their previous answers.