What is the 15-3 credit Hack

Why paying your credit card bill twice a month could help your credit score

Blog Introduction: You’ve probably been told that you should pay your credit card bill in full every month to avoid accruing interest and damaging your credit score. But did you know that there’s another way to keep your credit score high? Paying your bill twice a month can actually help increase your credit score over time. Here’s how it works.

How Paying Twice a Month Can Help Your Credit Score

When you pay your credit card bill in full and on time each month, you’re doing everything right when it comes to maintaining a good credit score. But if you want to give your score an extra boost, consider paying your bill twice a month instead of just once. Doing so can help improve your “credit utilization ratio”—a key factor that lenders look at when considering whether to approve a loan or extend a line of credit.

Your credit utilization ratio is simply the amount of debt you have divided by the amount of credit you have available. So, if you have $5,000 in debt and $10,000 in available credit, your ratio would be 50%. Generally speaking, the lower your ratio, the better—especially if you’re trying to get approved for a loan or other form of financing. That’s because a lower ratio indicates to lenders that you’re using less of your available credit, which makes you appear more responsible (and less risky) from a borrowing perspective.

Paying your bill twice a month can help lower your ratio because it means that your balance will be reported to the credit bureaus twice during the course of the billing cycle instead of just once. For example, let’s say you have a $1,000 balance on your credit card with a $1,500 limit. If you only make one payment per month, that balance will show up on your report for the entire month—raising your utilization ratio to 66%. But if you make two payments throughout the course of the month, one for $500 and one for $500, then only $500 of that balance will appear on your report at any given time—keeping your utilization ratio at 33%, which is much more favorable from a lending standpoint.

Of course, paying twice per month won’t do much good if you’re not also paying off your entire balance—so make sure you’re doing that too! If you can swing it financially, aim to keep your balance below 30% of your total available credit so that it has minimal impact on your utilization ratio (and therefore, your credit score).

 

Conclusion:        Paying off your entire balance each month is still the best way to avoid accruing interest and damaging your credit score. But if you want to give yourself an extra boost, consider paying twice per month instead of just once. Doing so can help improve your “credit utilization ratio,” making you appear more responsible (and less risky) from a borrowing perspective. Just be sure to keep making those full monthly payments—otherwise, all that extra effort will be for nothing!

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