Will a high card balance hurt my score if I pay it off right away?

If your issuer reports the balance before you’re able to pay it off, that could lower your score, but the effect will be temporary


Your credit report is a snapshot in time of where your credit stands. So if your card balance is high at the time it’s reported to credit bureaus, that may lower your score. However, the negative effect should be quickly reversed after you pay off the balance.

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Dear Keeping Score,

I have a question regarding my credit limit and credit score. I have a credit card with a $2,000 limit. I am planning to make a $1,500 payment for a travel package. I realized that it is 75 percent of my credit utilization.

However, I am planning to pay it off a few days after with my checking account before my credit monthly statement. Would that still affect my score simply because I used 75 percent of my limit at one point in time? Thanks. – Andy

Dear Andy,

Have you ever heard the saying “if a tree falls in the forest and there is no one there to hear it, does it make a noise?” Well, your credit situation is similar.

The first thing to understand is that any time your credit report is accessed it looks at where you are at that exact moment in time. If someone accesses your report after you charge the travel package but before you pay it off, your utilization is going to be sky-high at 75 percent. This is going to affect your score negatively at that moment in time.

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How credit utilization affects credit score

Keep in mind that the amounts owed or credit utilization category of the FICO score is worth 30 percent of your score and includes utilization ratios (high on this card), as well as the total dollar amount of debt owed (low on this card). In both instances, higher values may indicate a higher risk of default, and as a result, a lower FICO score.

However, once you pay off the trip-related charges your utilization on this card will reduce to zero (assuming there are no other charges on this card). This, too, will have an impact on your score, but in a positive direction. Maybe not exactly where you were before, but it should not take all that long to recover from any negative points you got from the high utilization.

Any gap in score recovery is attributable to the way in which the algorithm considers new behavior, like your big trip deposit, until it’s sure that this isn’t a new pattern of behavior. So, until it’s clear that you have returned to your usual pattern of spending and paying, you may appear to be a slightly higher risk. This shouldn’t take long.

See related:  Individual vs. combined utilization: Which one has a greater effect on score?

Identify your statement closing date

What will make the biggest difference is when your creditor reports to the credit bureaus. This is generally done upon your account statement closing date – not the payment due date as you might expect. Every account has a different closing date, so it can be hard to pinpoint. You will need to look at your statements to determine your statement closing period.

I would suggest you take both actions – charge the travel package and pay it off – a few days before the statement closing date in order to allow time for payment processing, posting and updating. This means you will need to pay the charges off before the account statement closing date and NOT the statement due date, so don’t be confused by that.

If you time it right, your score should not be affected one way or the other by your actions. The balance information reported to the credit bureaus is used in the FICO score calculation. This includes only the most recent month’s balance and not any previous balances.

See related:  Credit limit tricks: Keep a high score while still using your card

Why ring up such a big balance on your card?

Looking at this from my own personal perspective, I can think of some good reasons to do what you are planning to do. No. 1 is that the credit card you are using hopefully offers rewards in the form of cash back, a travel-related credit, loyalty program points or miles, or something else you can and will use. That’s why I would do something like this, since $1,500 has the potential to boost your rewards account balance.

There is also the fact that if you pay using a check or cash, you lose the protections a credit card offers. Using a credit card will make it much easier to dispute any charges if something goes wrong with the trip. It won’t matter that you will already have paid the trip off by the time anything does go wrong; your credit card protections will remain in place.

Your card may also offer some type of trip insurance in case you have to cancel after the deposit is no longer refundable. But you do need to know exactly what your card will cover because all credit cards are not equal in this regard. So be sure to check that out beforehand.

See related:  Should I get a retail card with a 0 percent APR deal to make a big purchase?

Don’t apply for a new card before you pay off your current one

So, my bottom line is that as long as you are not going to be applying for any new credit in the middle of your planning – in other words, after you charge the trip but before you pay it off – I don’t think you have much to worry about.

Don’t even think about a new credit right now unless you need it for a good reason. And if you can time it so that you keep all activity within your statement period, you should be able to embark on your adventure with no credit worries before or after your trip. With some planning, this is one tree that will not make a noise at all.

Remember to keep track of your score!

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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