Many borrowers are confused about what can help or hurt them when it comes to their credit. One Money Minute viewer asks, “Is it a good idea to completely pay off my credit card balance each month when I get my statement?”

From mortgages to cash, interest rates, and credit, Robert Palmer helps you with it. As host of the Money Minute radio show, the CEO of RP Funding uses his expertise in the financial and real estate industries to answer your questions and offer valuable advice on money saving tips and personal finance goals.


Robert’s Response

It’s good idea to pay off your credit card balance each month, but there is a right and a wrong way to do it. I’ll explain what that means.


Follow Your Credit Statement

When your credit card company generates your credit statement and mails it to you, that’s the balance they report to the credit bureaus. The fact that you turn around and pay that balance down to zero a couple of days later never gets sent to the credit bureaus. In most cases, they only transmit the balance that’s on your statement.


The Wrong Way to Pay Off Your Credit

A lot of people get stuck in a vicious cycle where they’re consistently paying off their credit each month, but it goes unnoticed by the credit agencies. For example, say you charge $1000 and pay it off, but by the next statement date, you’ve got another $1000 on it. What happens is the credit bureau only sees that you carry $1000 balance. They’re not seeing that you paid it off.


The Right Way to Pay Off Your Credit

There’s a secret way to temporarily raise your credit score by paying off your credit balance each month. Maybe you’re about to buy a car or maybe you’re about to buy a house and you want to have the best credit score possible to make that purchase. If you really want your credit score to “pop,” you actually need to send-in your payment before the statement comes out.


Stay Ahead of Your Statement

For example, if your statement comes out on the 20th of the month, then you would want to pay the card off on the 19th. That way, when they mail you the statement, it will read “zero due, zero balance.” That’s what will be reported to the credit agency and that’s what will temporarily raise your credit score.