Will Making 2 Monthly Payments on 1 Card Help My Credit?
It’s common knowledge that late payments can hurt your credit score. So it makes sense to ask, will making more than one payment each month help improve it? Will it have any effect at all?
Making multiple payments won’t directly increase your credit score. That’s because credit reporting bureaus don’t record multiple monthly payments. As long as you send the minimum amount by the due date, the information sent to the credit bureaus will be the same — the minimum balance has been paid and the account is in good standing.
“Because there’s no record of it, there’s no way the credit scoring models can consider the fact that you’ve made two payments rather than one payment, or five payments rather than two payments,” said Atlanta-based credit expert John Ulzheimer, formerly of FICO and Equifax.
However, making more than one payment each month on your credit card can indirectly help boost and protect your credit score in a few ways.
Avoid late fees and penalties
If you miss a credit card payment, you will end up paying late fees and interest on the balance, and it will probably drag down your credit score.
“Late payments can trash your credit score, but you’re not going to make up for it because you’ve doubled up the next month,” Ulzheimer said.
Making multiple monthly payments can help, however, by lessening the chances that your payment will be late. As long as your two (or more) payments ultimately equal the minimum amount due, submitting multiple payments a month removes the possibility of forgetting, or the payment simply not making it there on time.
This strategy can be particularly beneficial if you find yourself struggling to pull together the minimum amount due every month. Making two or three small payments per month could prove easier than making one large one. And eliminating the late fees will certainly reduce the amount you owe.
Lower your balance
When you make multiple payments, you will likely end up paying more than the minimum amount due, as well as keeping your balance low throughout the billing cycle. Credit card issuers report your balance to the credit bureaus each month. So, if you’d rather not have a massive card balance reported to the bureaus, jeopardizing your credit utilization rate, then you can make a payment early to help lower your balance.
That rate, also referred to as the credit utilization ratio, is one of the most important factors in determining your credit score.
Reduce interest payments
If you carry a balance on your card, you’re paying interest on that balance every month. Paying multiple times a month could help reduce those interest charges and make it easier to eventually pay off the balance.
Interest charges on your credit card can be figured by applying the monthly periodic rate to the average daily balance on your account. Your card issuer calculates the interest on your account every day, and new interest is added to your balance daily — not just at the end of the month. So, the more payments you make, the more you could reduce those interest charges.
If you are carrying a balance on more than one card, you can tackle the card with the highest interest rate first. At the least, make the minimum payment. Then, if your budget allows, make an extra payment on that account every month. You’ll reduce the interest charges and erase your debt more quickly.
Once you’ve done that, move on to the card with the next highest interest rate, and so on.
If you get a bonus at work, consider using it to make another payment on your account. Pay half your balance online, or over the phone, and when you receive your bill, pay as much of the rest as you can. That will help keep interest charges in check.
The key to credit health is making on-time payments
Your credit score is based on activity on your credit report, which details how well you’ve managed past and current accounts. It also records each time a lender requests your credit report for a credit application and whether any accounts have gone to a collection agency.
Making payments on time is the most important factor in your credit score.
A good credit history and credit score can make all the difference when trying to purchase a home or a car. Your score also can affect your ability to get a job or find insurance.
Your FICO Score — the score most commonly used by creditors — is calculated using data grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). The higher your score, the more attractive you are to lenders.
According to FICO, scores can change due to:
- Payment history updates
- Time since the last late payment, collection account or public record item
- Adding or removing credit accounts, collection accounts or public record items
- Increases or decreases in credit card balances
- Increases in the length of time since accounts were opened
- Adding or removing inquiries
- Changes to the mix of different account types
It never hurts to pay more
There’s no hiding credit card debt.
Making multiple payments is one strategy that can ease the burden of debt. Whether you end up paying more or the same amount you normally pay, you can still see benefits in the form of fewer fees, smaller interest charges and a more favorable credit utilization ratio.
All of that, in turn, could help your credit and help brighten your financial future.