Can I have a negative balance on an account on my credit reports?

I love how some of my readers think. They’re always looking for weaknesses in the fence when it comes to credit scoring.  I got this one late last week:

Q: John, I always pay my credit card balance in full every single month without fail. I know that one of factors in my FICO score is the ratio of my credit limit that I’m using. I know from reading your blogs that even if I pay in full each month my balance is still greater than $0 on my credit reports because of the lag time in reporting.  So, what if I pay MORE than I am due to pay so that I have a negative balance in my credit card account? Can that be reflected on my credit reports and help my FICO scores?

Answer: Love it, love it, love it!  Someone’s been listening! The answer is unfortunately no, your credit reports cannot reflect a balance less than $0 on your accounts despite the fact that you may actually have a credit with your credit card issuers. But, that’s not to say that you can’t win the utilization battle! In fact, you CAN have a $0 balance on your credit card account show up on your credit reports month after month.  It’s just going to take a little advance timing, which it sounds like you would be very good at doing.  Follow me…

You have two keys dates associated with your credit cards; the due date of the payment and the statement closing date. Throw out the due date.  It’s not important for this strategy. Find out the statement closing date of your credit card/s. Let’s say it’s the 20th of the month. As long as you have a $0 balance on your cards on that date the balance on your credit reports will reflect $0. Credit card issuers report your previous month’s statement balance to the credit bureaus. So, as long as that value is $0, you’ve won the battle.

Now, you’re going to have to pay your bill in full PRIOR to the statement closing date. That means you’ll lose all of the benefit of the 21 day grace period, but who cares? You always pay in full anyway so at worst you’re losing 21 days of interest on the monies you were planning on using to pay the credit card bill.  That miniscule amount of money is a small price to pay for a maxed out credit score.

If you don’t know what your statement closing date is, just call your credit card issuer and ask them.  It’s not a secret. Good luck to you! You’re about to become one of the few people who pays their credit cards in full each month and will actually get the benefit of doing so in your FICO scores.

Credit Expert Witness, 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 Monitoring, Credit Report, Credit Score, Money & Identity

This post was written by John Ulzheimer