Dear Liz: We charge essentially all our purchases, totaling several thousand dollars a month, on two credit cards. We’re in the habit of paying off the balances about two days before the statement closing date.
Naturally, when we receive our next statements, the remaining balances are very low, and those low balances are reported each month to the credit bureaus. Our FICO credit scores are above 800. Does the way we’re paying our cards actually help our scores?
Answer: Absolutely. The FICO credit scoring formula is sensitive to the gap between your available credit and the credit you’re actively using, as represented by the balances your issuers report to the credit bureaus. The bigger the gap, the better, and paying off your balance a few days before the statement closing date each month is a good way to reduce the reported balances.
Just make sure to make a second payment to pay off the remaining balance before the due date. Otherwise you may face late payment penalties and interest charges.