Your credit score is based on the information about your debts and payments reported by lenders to the three main credit bureaus — Experian, Equifax, and TransUnion. The credit reporting bureaus typically ask to receive information once per month. So, credit card companies will usually report card payments to the credit reporting bureaus at the end of your card’s monthly billing cycle, also known as your statement date. Credit card companies typically spread statement dates throughout the month.
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 credit score.
How Credit Card Payments Are Reported to Bureaus
As mentioned above, credit card issuers typically report to credit bureaus on your regular billing cycle. 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 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
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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 boosting 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 improve 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, 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 stays on your credit report for only two years, and its 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 improve 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 bill pay 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. Understanding what information has an impact on your score, and 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.
Applying for a credit card through SoFi won’t affect your credit score, though an approved application may trigger a hard inquiry. For a limited time, new credit card holders† who also sign up for a SoFi Checking and Savings with direct deposit can start earning 3% cash back rewards on all eligible credit card purchases for 365 days*. Offer ends 12/31/23.
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.
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 will your credit score improve?
Your credit score should improve 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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The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
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