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What day should I pay on my credit card bill? Well, that depends

What day should I pay on my credit card bill? Well, that depends....read more

Photo of Donna Joerling

Written By (Owner and Broker). Created on 09/29/2015.

 

Regarding balances on revolving debt:

Imagine two customers with similar profiles, yet vastly different scores.  Let's call them John & Jane.  

John & Jane essentially have matching credentials, same job, income and assets.  Both want to purchase a home.  Everything about their credit is identical.  They even utilize the same amount of money each month on credit and both pay in full every month. 

             John, however, pays off his card on the 22th of the month and Jane pays hers on the 27th.  John has a 745 FICO and Jane has a 680.   Why?  The answer is simple: Because of one date.  Many creditors report updates to the credit agencies one a month, usually about a week or so before the bill arrives in your mail.   Whatever the balance is the day they report is the balance shown on the credit report.  In this particular case, the creditor reports every month on the 25th.  John pays on the 22nd, so the credit report shows non-risky credit utilization.   However, the creditor reports Jane is using all of her available credit.  She appears to be a higher risk so her score is lower.   Jane doesn't realize the balance reported by the creditor is one-third of what makes up her credit score.  

            This score will affect all kinds of things, such as credit card interest rates, insurance rates, and more importantly mortgage interest rates.   Make sure customers are looking up their credit report online, and that they take note of the date the creditor last reported.  That way they can be sure to pay down or payoff their balance(s) before the report date and not suffer the same fate as Jane.

            The date of activitity is important for improving credit on open and active accounts.  This date shows the last time you used the account.  After you stop using an account, it will eventually stop reporting, because the creditors have to pay money to report your information.  Let's say you have a buyer who's scores are just below where they need to be but you don't see anything that needs to be corrected on their report.   Then you notice one of their cards last activity date is more than 2yrs ago.  This good account is not being counted.  In this case you would tell your customer to use that card to purchase something small and while they are there to add their spouse to the account as an authorized user on the account.  Within days, their scores could increase significantly and their score problem could be solved. 

The Joerling Group

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