How to get extra points on your credit history. Myth or reality
Every person who moves in the world of finance and credit, wants to generate points and not just any points, but high ones. They want to have a high credit score with the purpose of making it more and more beneficial and profitable for their business or interests.
That is why there are strategies that help you get more points to accumulate and increase your credit history.
- You generate more points when you pay your loans and credit cards before the due date: when you pay a loan before the due date you reach a zero balance that appears on your credit report and can slightly help your credit score, since credit scores consider the amount of accounts with balances you have.
It should be noted that this has nothing to do with when you pay off the loan.
- You get more points if you pay more than the corresponding balance; This trick is said to make your credit score go up by paying more than the balance owed on a credit card account.
While this may give you credit on your credit card account, on credit reports, there cannot be a negative balance associated with a credit card account. Whether you pay the balance in full or pay extra money, the account will report a zero balance to the credit bureaus, which reflects on your credit report.
Not only does this advice not help your credit score, but it also ties up your money in a place where it’s not working for you by earning interest, and you have to buy things with your credit card to use the funds you put on your card balance.
Paying your balance in full each month is always the best option because that way you can avoid paying interest or having the account appear delinquent, but there is no need to go overboard by paying a larger amount than you actually owe. It would not make sense, rather it would be considered an unnecessary and absurd waste of money.
- You get more points if you make larger payments per month; There is some truth to this recommendation, but it doesn’t work exactly the way proponents of this strategy often claim.
In reality, credit scoring models do not indicate the number of payments you have made per month. It only shows the total amount of all the payments you made during that month added together.
However, there’s a different reason why this strategy can earn you some extra credit score points.
When you make multiple payments within a billing cycle, you are paying off part of the balance before the statement closing date, which is when your account balance is reported to the credit bureaus.
Therefore, because of the early payments, the balance reported to the credit bureaus will be lower, which helps increase your credit score by lowering the individual utilization rate on that account, as well as your overall credit utilization rate.