Do You Know Exactly When Your Credit Balance Is Reported?

Certified Mortgage Advisor
NMLS 1701021
May 26, 2020

When your credit balance is reported?

Today's question is, does how much I use on credit cards throughout the month, over 30% matter, or just what utilization percentage is reported to the credit bureaus? My overall average for credit cards is 7% combined.

How your payment experience is reported to credit bureaus

So this is how your utilization gets reported to the credit bureaus. Basically think of it as your account is hidden behind a curtain. Then once a month you have Equifax, TransUnion, and Experian, they open up that curtain to see what's inside, and that's what they use to report on your credit report.

For instance, if you have a credit card that you pay off every single month down to zero dollars. Then, it's going to look like you never use your credit card. You're going to have that account on there, but it's going to look like you've never used a balance before.

You need to leave some balance

So, this is what you should do. You should pay down your balance, but leave a couple of dollars on there. That way you can show that you're using credit, and it's not always getting paid down to zero.

Because Equifax, TransUnion, and Experian, aren't able to see what's happening on your credit and they end, these credit accounts, if they don't see it when they've kind of opened that metaphorical curtain. So kind of a weird example, but that's how I like to think of it.

It only gets reported once a month

So whatever your balance is, then that's what gets reported. So it doesn't matter how much you use. You could go all the way up to a hundred percent utilization, but as long as you get that paid down before it gets reported each month, this is the only thing that the three credit bureaus are going to see.

Pay your balance but don't zero it out

So pay down your balance. I wouldn't pay it down to zero. I paid down to a couple of dollars. I would leave that balance less than 10% of your total credit limit.

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