Credit card companies typically report to the credit bureaus monthly. This usually happens at the end of your card’s monthly billing cycle, also known as your statement or billing cycle date. Credit card companies typically spread statement dates throughout the month, so your date may not be the same as your significant other’s or your best friend’s.
The credit reporting bureaus then use this data to update your credit score. Here’s a closer look at how payments are reported to the credit reporting bureaus as well as how factors like on-time payments can affect your three-digit score.
How Credit Card Payments Are Reported to Bureaus
Credit card issuers typically report to credit bureaus on your regular billing cycle date. Each credit card may report at different times, and they may report to some of the major credit bureaus and not others. Reporting is up to the lender’s discretion, so it is also entirely possible that they won’t make a report at all.
Credit bureaus, such as Experian®, Equifax®, and TransUnion®, may collect a variety of information, including:
• Personal information, such as name, address, date of birth, Social Security number, and employer
• Credit account information, such as balances, payments, credit limits, credit usage, and when accounts are opened or closed
• Credit inquiries
How Credit Scores and Reports Are Updated
The credit reporting bureaus will generally update your credit score as soon as they receive information from your credit card company. That means that your credit score could change relatively frequently as you make credit card charges, especially if you have multiple credit cards.
Also, because credit card companies only report credit activity periodically, there can be a bit of a lag in how long it takes for a payment to show on your credit card report. When you read your credit report, it may not match your current account balances, instead reflecting the last information reported to the bureaus. This situation may be particularly irksome if you’ve paid off debts in hope of building your credit score. Fortunately, your information should be updated during the next reporting period.
However, if you notice that no changes are made after a number of months, it’s worth contacting your lender to make sure changes are reported correctly. If they can’t resolve it, you can contact the credit bureau.
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How Credit Card Balances Affect Credit Score
Credit reporting bureaus may collect information about your credit card balance. There is a popular misconception that carrying a credit card balance from month to month will help you positively impact your credit score. However, this is a myth. In fact, carrying a balance can actually hurt your score.
An unpaid balance is not necessarily seen as a bad thing. However, credit utilization — how much of your available credit you’re using — can have an impact on your score. If your balance exceeds 30% of your borrowing limit, it may have a negative impact on your score. Those who keep their credit utilization below 10% tend to have the highest credit scores.
It’s best to pay off your credit card balance each month to protect your credit score and to avoid racking up costly interest charges, which can cause your credit card debt to balloon.
How Applying to Credit Cards Affects Credit Score
Before you apply for a credit card, it’s important to know the difference between a hard and soft inquiry. When you apply, you will trigger what’s known as a hard inquiry when a lender requests to see your credit report.
In contrast, a soft inquiry occurs when you check your own credit or use a credit monitoring service, for example. Hard inquiries will generally have a negative impact on your credit score (though often only by several points temporarily), while soft inquiries will not.
Hard inquiries suggest that you are in the market for new credit. That may seem like a no-brainer. But in the eyes of other lenders, a hard inquiry suggests that you may be in some sort of financial stress that makes you a bigger risk for borrowing money. This is especially true if you have many hard inquiries in a short period of time.
Luckily, the hard inquiry’s effects fade relatively quickly.
In general, it’s wise to avoid causing many hard inquiries in a short period of time. There are some exceptions to that rule. If you’re shopping for a mortgage, auto loan, or new utility providers, multiple inquiries in a short period — typically 14 to 45 days — are usually counted as just one inquiry.
How On-Time Payments Affect Credit Score
Your payment history is one of the biggest factors that goes into calculating your credit score. As a result, making payments on time is one of the best things you can do to maintain a strong credit score or to positively impact your score.
Even a single late payment can have a negative impact on your score, though the missed payment likely will not show up on your credit report for 30 days. If you can make up the payment within that time period, your lender may not report it, though you may still be subject to late penalties.
It’s also important to understand that if you only make a partial payment, that will still usually be counted as late and reported as such to the credit bureaus.
To make sure that you pay bills on time, consider setting up a budget to help control your spending. You might also automate your payments to ensure you don’t miss any payment due dates. But if you do so, make sure that you have enough money in your account to cover your credit card balance.
Recommended: When Are Credit Card Payments Due?
The Takeaway
The credit reporting bureaus collect all sorts of financial information from your various lenders to create your credit score. Your credit card company likely reports your card activity about once a month, on your statement or billing cycle date. Understanding what information has an impact on your score, as well as the impact of on-time payments and credit inquiries, can help you keep your score as high as possible and help keep credit card costs down.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What time of the month do creditors report to credit bureaus?
Creditors may report to the credit bureaus at any time of the month, though credit card companies will usually make their reports at the end of the billing cycle, or on your statement date.
How often do companies report credit?
Credit card companies usually report to the credit bureaus once a month. However, they do so at their own discretion.
How long after paying off debt until you see an impact on your credit score?
Your credit score should see an impact after paying off a debt as soon as that debt payment is reported to the reporting bureaus, usually within 30 days. If your payment doesn’t show up on your report after a few months, contact your lender to make sure it was reported correctly.
Photo credit: iStock/iamnoonmai
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