Paying bills on time is crucial to maintaining a positive credit score. A consumer’s credit payment history accounts for up to 35% of their FICO score, according to myFICO. Tracking due dates and splitting bills into semi-monthly payments can help borrowers avoid late or missed payments and save money.
There are several ways to improve credit scores and avoid late payments and fees.
How to Boost Credit Scores by Paying Bills Every Two Months
Those with less than perfect credit might be surprised how quickly they can improve their credit scores, starting with paying their bills every two months. To do this efficiently, cardholders can perform the following steps:
- Itemize invoices. Make a list of all bills, including minimum payments and due dates.
- Allocate two days each month to pay bills. Decide which two days of the month to make payments.
- Count the monthly bills and divide them by two. Cardholders should divide each bill by two to determine semi-monthly payment amounts.
Why it helps
- Avoid missing payments. Borrowers who create a plan to consistently pay their bills twice a month probably don’t have to worry about missed payments. This not only improves credit scores, but also avoids late payment fees.
- Reduce interest and pay your debts faster. Many lenders compound the interest daily and semi-monthly payments reduce the principal amount owed. Therefore, semi-monthly payments slow the compound interest rate, helping borrowers save money.
- Lower Credit Utilization Scores. Mid-cycle payments could reduce the amount owed by borrowers, causing lenders to report lower balances to credit reporting agencies. Lower credit utilization scores could improve credit scores.
3/15 Paying by Credit Card – Another Trick to Boost Credit Scores
It may be useful to split loan repayments into two monthly installments. However, cardholders can improve their credit score by perfectly timing payments, also known as the 15/3 credit card method. Here’s how:
- Determine each due date.
- Make the first half of the payment 15 days before the due date.
- Make the second half of the payment three days before the due date.
How it helps
The 15/3 credit score hack uses specific timing for the benefit of the borrower. The goal is to ensure that lenders report a lower balance to credit bureaus by the end of the billing cycle if cardholders make payments strategically to reduce their balances.
Although there are no guarantees, lower stated balances will reduce credit utilization scores, which may result in a higher credit score.
Boost your credit score with extra payments
Borrowers with cash available at the end of the month may wish to make additional payments beyond the minimums. This will help them pay off their debts faster, avoid late fees and reduce interest.
Why it works
There are several reasons why making extra payments improves credit scores:
- Reduce balances quickly. Credit utilization is important in how credit reporting agencies calculate credit scores. Additional payments reduce balances faster.
- No late payment. Late payments can drop credit scores between 90 and 110 points, while regular, on-time payments can boost scores. The extra payments likely reduce a borrower’s chance of having late payments.
- Reduce interest. Additional payments are usually applied to the principal balance of the loan. This could save a borrower hundreds or even thousands of dollars in interest over time.
Paying by credit card 15/3 is a relatively easy hack towards financial responsibility, pushing credit scores to the top when done consistently until the debt is paid. However, this is not the only option towards improving credit rating.
Some people would do well to make more than two monthly payments as the optimal way to manage their credit, keeping it in check. Also, it’s not a bad idea to pay the charges in real time, instead of waiting for the amount to appear on the invoice.
Ashley Eneriz contributed reporting for this article.
Information is accurate as of October 6, 2022.
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