Timing is key to boosting your credit score

Credit card issuers typically report account information to the credit bureaus around the closing date, not the due date. This means the information reported to the credit bureaus reflects your balance and activity as of the closing date.

Transactions that post to your account after you've made a payment will be included in your balance and score calculation. So, if you want a boost in scores, refrain from making new transactions between your due date and closing date. 

In fact, charges made on your closing date may be included in your balance and score calculation reported to the credit bureaus.That's why timing is everything.

Here's a simple example:

• Let's say you have a card with a $500 credit limit.
• The due date is the 10th and the statement closing date is the 14th.
• You pay your balance in full by the due date, but charge $400 on that card between the 10th and the 14th.
• That $400 in charges after the 10th and before the 14th, is the credit utilization and account balance that gets reported to the credit bureaus.
• Now, your credit utilization is 80% of the available credit ⏤ this will severely ding your score.

Paying your balance, in part or in full, before or on the closing date decreases the unpaid balance used to calculate your credit score and new statement balance. And, keep in mind that transactions posted to your credit card on the closing date will likely be included in your balance and score calculation also.

Credit Score Hack

Knowing the closing date transactions will be reported to the credit bureaus means if your balance is lower, ideally 7% or less of your available credit limit, your credit scores will get a boost. FICO has suggested that people with the best credit scores use 7% or less of their credit lines.

But peep this, reducing your credit card account balance to boost your scores works whether the credit card has a $500 limit or a $5,000 limit. As long as you reduce the account balance before the closing date, that lower balance will get reported to the credit bureaus.

If you're unable to pay down your balance to 7% of your available credit limit, simply paying down your balance, especially if you're close to your limit, will give you a boost in scores.

What is the difference between a closing date and a due date?

There's a significant difference between a credit card due date and a closing date, they serve different purposes. The due date is when a payment is due on your credit card while the closing date is the last day in a billing cycle.

As an example, your payment due date of June 5, 2024, approximately 3 to 4 days after this date, around June 8, 2024, would be your closing date and by June 9, 2024, the credit card issuer will report your balance and payment information to the credit bureaus. Here's the breakdown:

About the Credit Card Closing Date

• Marks the end of your billing cycle. Typically occurs on the same day each month, although it doesn't necessarily coincide with the end of the calendar month.
• All transactions made up to and including the closing date are included on your upcoming statement.
• Interest and fees are calculated based on your balance on the closing date.
• Grace period begins. This is a window of time (usually 21-30 days) after the closing date where you can pay your balance in full to avoid interest charges.

About the Credit Card Due Date

• The last day you can make a payment on your credit card statement without incurring a late fee. Typically about one month after the closing date.
• Minimum payment needs to be received by this date to avoid late fees, but paying the full balance is always recommended.
• Late fees and interest charges may be applied if your payment is late or you carry a balance beyond the grace period.

Here's an analogy: Think of your billing cycle like a month-long trip. The closing date is when you pack your bags and finalize your expenses for the trip. The due date is when you have to pay for everything back – think of it as returning home and settling your travel bill.

Bottom Line

Since your credit score is based on the information in your credit reports, timely payments and maintaining a low balance closer to the closing date can positively impact your score.

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