I Pay My Credit Card Bills in Full Each Month, Why Does My Credit Report Still Show That it Has a Balance?

This is quite the dilemma for those who are fortunate enough to be able to pay their credit card bill(s) in full every month. It is frustrating that your credit report doesn’t reflect this responsible behavior.  If you use your card each month, your credit report will always show a balance.  This issue can be blamed on how the data is supplied to the credit reporting agencies.

The credit card issuers send their accounts receivable data to the credit reporting agencies on a monthly basis.  This information contains your credit limit, amount you owe (balance), minimum payment, date of last payment and payment date.  If you used your credit card that month, there will be a balance due on your statement.  When you pay your bill, your account is credited for that amount.  The issue is that you will always show a balance on your credit report, if you use your credit card and pay your statement when you receive it.

To avoid showing a balance, you need to pay your bill before the closing date of the current month. Don’t charge on your card between the date you pay and the end of the cycle or you will still show a balance.  For example, the closing date on your account is September 30.  Let’s say today is September 26 and you have charged $600 since you last statement. You can pay the $600 now and the payment will be received before the statement date ends and you will have a zero balance.  The catch is you can’t charge anything between the 26^th and 29^th or your statement will show a balance.

Even if you pay your credit cards in full each month, you could have a high balance because you charge everything on your card.  It is best to keep your balances low because credit utilization is very important to your credit score. The ratio of your total balances to total credit limits is best kept below 10%.

Of course you should always pay before the due date to make sure you don’t have any interest charges or late fees. If you want to have a zero balance or at least lower your balance, pay the bill before the end of the cycle and prior to receiving it.  The best way to do this is through online bill pay, the bill is paid sooner and you know which charges have been applied to your account.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Credit Report, Credit Score, Debt, Getting Credit, Improving Credit, Money & Identity

This post was written by John Ulzheimer