How multiple card payments raise credit scores

By Sally Herigstad

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

Dear 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 remaining amount.

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 checking account.

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 more quickly.

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

Gary Foreman, "New Frugal You"

Sally Herigstad, "To Her Credit"

Cathleen McCarthy, "Cashing In"

Jane McNamara, "Let's Talk Credit"

Elaine Pofeldt, "Your Business Credit"

Erica Sandberg, "Opening Credits"

Published: November 16, 2012

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