Statement vs. current balance - do credit bureaus know/care?
July 24, 2024 9:42 AM Subscribe
If you always pay your credit cards in full and have no debt, does paying off your current balance instead of your statement balance improve your credit score?
Best answer: Well, no not really. Not unless you're carrying an insane extra balance pushing your credit utilization crazy up, and it just happens to coincide with the exact date they look at your data, and you do this consistently over time.
When I bought my car I was able to pay for it outright in cash, but I put it on my credit card instead to get the cash back. Free money babyyeee. I was within $500 of one card's credit limit until I paid the statement balance, and my credit score dropped something like 5-10 points because of it for one month only.
posted by phunniemee at 9:46 AM on July 24 [1 favorite]
When I bought my car I was able to pay for it outright in cash, but I put it on my credit card instead to get the cash back. Free money babyyeee. I was within $500 of one card's credit limit until I paid the statement balance, and my credit score dropped something like 5-10 points because of it for one month only.
posted by phunniemee at 9:46 AM on July 24 [1 favorite]
Technically, yes. Practically, no.
I have no revolving debt, a high credit score, pay the full balance of my cards automatically every month, and I also use credit cards that provide FICO score notifications. My FICO score sometimes drops slightly, in the single digits, due to lessened "available credit" when I make an abnormally large purchase (say, a major repair or major appliance). The score then recovers (again, by single digits) after payment is made.
While my score does technically drop when I'm utilizing more of my credit than normal, it does not drop by any amount that would have any effect on my qualification for additional credit, or the interest rates for that additional credit. I just ignore the minor fluctuations.
posted by I EAT TAPAS at 9:51 AM on July 24 [1 favorite]
I have no revolving debt, a high credit score, pay the full balance of my cards automatically every month, and I also use credit cards that provide FICO score notifications. My FICO score sometimes drops slightly, in the single digits, due to lessened "available credit" when I make an abnormally large purchase (say, a major repair or major appliance). The score then recovers (again, by single digits) after payment is made.
While my score does technically drop when I'm utilizing more of my credit than normal, it does not drop by any amount that would have any effect on my qualification for additional credit, or the interest rates for that additional credit. I just ignore the minor fluctuations.
posted by I EAT TAPAS at 9:51 AM on July 24 [1 favorite]
@Jane, I'm not entirely sure about that, I've always paid in full every month and always had a near-perfect score. This was true even before I had car or mortgage loans to "prove" that I'll pay interest too.
For sure, I would not run an interest-bearing balance just to possibly appeal to the scorekeepers.
posted by Dashy at 10:07 AM on July 24 [10 favorites]
For sure, I would not run an interest-bearing balance just to possibly appeal to the scorekeepers.
posted by Dashy at 10:07 AM on July 24 [10 favorites]
Best answer: It seems to be marginally so, if at all. Out of curiosity I have used my local credit union's credit tracker for a year or so, and what i find is that my number goes up or down 3-5 points mostly based on the percentage of my credit being used. So, if they check when i am carrying a balance for a purchase the score drops a bit, but when i pay it off (so as to never carry an interest bearing balance) it tracks back upwards. I almost always just pay the statement balance. It's a silly game.
posted by OHenryPacey at 10:20 AM on July 24 [1 favorite]
posted by OHenryPacey at 10:20 AM on July 24 [1 favorite]
Best answer: My understanding of it:
When your credit card reports your score to the credit bureaus, the current utilization is taken into account and can have a negative effect on your credit score. Let's say your credit limit is $10,000 (for easy math) and in statement period A you make a $200 purchase and then in statement period B you make a $9000 purchase. When your statement comes, if you pay the statement balance of $200, your credit card will report that you are at 90% usage which can negatively impact your score. (How much? Depends on a lot of different factors - if you have other cards, how high your total utilization is, whether you've recently taken on other debt, etc.) If instead, you pay the current balance, it will report as 0% utilization which is a positive for the credit bureaus.
My experience : I had a crazy vet bill the month before I was needing to rent an apartment and my credit score dropped like 50 points even though I always paid my statement balance in full. I paid the entire balance off, and then I called up my bank (which my credit card was with) and asked them to do a rescore. It took maybe another 3-5 days for the rescore to take effect and then my score went back to what it was before.
posted by matcha action at 10:21 AM on July 24 [1 favorite]
When your credit card reports your score to the credit bureaus, the current utilization is taken into account and can have a negative effect on your credit score. Let's say your credit limit is $10,000 (for easy math) and in statement period A you make a $200 purchase and then in statement period B you make a $9000 purchase. When your statement comes, if you pay the statement balance of $200, your credit card will report that you are at 90% usage which can negatively impact your score. (How much? Depends on a lot of different factors - if you have other cards, how high your total utilization is, whether you've recently taken on other debt, etc.) If instead, you pay the current balance, it will report as 0% utilization which is a positive for the credit bureaus.
My experience : I had a crazy vet bill the month before I was needing to rent an apartment and my credit score dropped like 50 points even though I always paid my statement balance in full. I paid the entire balance off, and then I called up my bank (which my credit card was with) and asked them to do a rescore. It took maybe another 3-5 days for the rescore to take effect and then my score went back to what it was before.
posted by matcha action at 10:21 AM on July 24 [1 favorite]
One component of your score is your current ratio of debt to total credit (lower ratio is better, with 0 being the best), and so paying off your full balance vs statement balance can cause this factor to fluctuate by a few points. It also depends on exactly how your payment cycle lines up with when credit agencies pull data. For a good score, I've never seen those go more than about ~5 points, which almost certainly doesn't matter (perhaps) unless you're doing something like getting a mortgage.
Keep in mind that playing off your balance in full actually does bad things for your credit score.
Source, please? Here's a number of sources that say the opposite: cfpb, experian, equifax, transunion, chase.
posted by advil at 10:23 AM on July 24 [5 favorites]
Keep in mind that playing off your balance in full actually does bad things for your credit score.
Source, please? Here's a number of sources that say the opposite: cfpb, experian, equifax, transunion, chase.
posted by advil at 10:23 AM on July 24 [5 favorites]
I've put all my expenses on my credit card and paid it off monthly for ~20 years. My mortgage broker gushes about my credit score whenever I talk to him. I pay the statement balance because it's simpler and makes it easier to track my spending. Any difference in credit score between paying the statement balance and the outstanding balance is marginal and not worth the time spent thinking about it. Just pay the statement balance and forget it.
posted by no regrets, coyote at 10:25 AM on July 24 [3 favorites]
posted by no regrets, coyote at 10:25 AM on July 24 [3 favorites]
Paying off your balance is fine for your credit score in most models if you don't close the card or account. If you pay it off and close the account, then your total available credit will be reduced. If the credit line was large, then that can have a large impact on your credit score. (This is for the basic models like the FICO Score 10 Suite or Vantagescore. Sometimes there are custom scoring models that might weight things differently.)
posted by chesty_a_arthur at 10:48 AM on July 24 [1 favorite]
posted by chesty_a_arthur at 10:48 AM on July 24 [1 favorite]
I typically pay off my credit card balance before the statement date hits. So I usually have a balance of zero when the statement comes. On months that I forget to do this, my credit score goes down 3-5 points. This means that percentage of credit used ("credit utilization") affects one's credit score, albeit slightly (at least in the upper echelons - my score is above 800). I guess this is to say that my understanding of what "counts" in terms of your credit score is the balance when the statement hits.
posted by ClaireBear at 12:57 PM on July 24 [1 favorite]
posted by ClaireBear at 12:57 PM on July 24 [1 favorite]
Whatever loopholes and asterisks the credit industry uses, I suppose.
No? Not whatever?
They are substantially different types of credit, and having what they call "credit mix" affects your credit score. Having access/utilization on diverse types of credit (e.g. installment mortgage, revolving credit card, student loan, your Target card) and a history of paying regularly over time on them makes you a more attractive borrower to lenders. The reason your credit score went up when you got a new car loan is because you increased your credit mix.
ETA: this is* why people see their credit scores drop after they pay off their student loans, which is extremely demotivating. Is this fair? Nice? Sensical? No. But it is expected within the context of how credit scores work. They reduce their credit mix by closing those installment accounts.
*there is also a secondary component there about length of credit history since student loans are often a young person's first debt, but that's another can of worms
posted by phunniemee at 2:18 PM on July 24 [3 favorites]
No? Not whatever?
They are substantially different types of credit, and having what they call "credit mix" affects your credit score. Having access/utilization on diverse types of credit (e.g. installment mortgage, revolving credit card, student loan, your Target card) and a history of paying regularly over time on them makes you a more attractive borrower to lenders. The reason your credit score went up when you got a new car loan is because you increased your credit mix.
ETA: this is* why people see their credit scores drop after they pay off their student loans, which is extremely demotivating. Is this fair? Nice? Sensical? No. But it is expected within the context of how credit scores work. They reduce their credit mix by closing those installment accounts.
*there is also a secondary component there about length of credit history since student loans are often a young person's first debt, but that's another can of worms
posted by phunniemee at 2:18 PM on July 24 [3 favorites]
Mod note: A few deletions made. Please note that this question is about statement balance vs current balance, please don't reply to if you don't know the difference between the two. Thank you!
posted by loup (staff) at 9:38 AM on July 25
posted by loup (staff) at 9:38 AM on July 25
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posted by phunniemee at 9:43 AM on July 24 [2 favorites]