Closing Date and Due Dates Can Impact Your Credit Score – Episode #8

May 15, 2008 by  
Filed under Episodes

Closing Date, Due Date Play Role in Your Credit Score

There are two critical dates to be aware of when it comes to credit cards.

  • Closing date – when your credit card balance is calculated
    • This is the number reported to the credit bureaus as your monthly balance.
  • Due date is when your credit card payment is due

Tip: switch all your cards dates to keep the dates straight.  It’s hard enough to keep organized in today’s world, so take a few minutes to call all your credit cards and pick out dates that are similar across all of your cards.  Try for the 15th for the closing date and the 5th for your due date. Most credit card issuers will let you pick your dates, but if you have one that doesn’t let you switch then simply switch the dates on the cards to make that one.

Once you have your dates set up, you have more power to keep your balances low.  Let’s look at a very personal example below.  Here I have actual transactions over the course of a 31 day pay period.  In this example, my closing date is the 25th.  In scenario 1, I make a payment AFTER the closing date – on the 29th – for the FULL amount.  Still what gets reported to the credit bureau is a balance of $1692.45 [the yellow line].  In scenario 2, I make a payment BEFORE the closing date – on the 21st.  So, I’ve reset the clock.  Now, what the bureau sees is a reported amount of $195.95.

If my credit limit is $3000, here would be utilization figures for the period:

  • Scenario 1: $1692.45/$3000 = 56%
  • Scenario 2: $195.95/$3000 = 6%

Credit Card Due Dates and Closing Dates

A 56% credit card utilization usually doesn’t mean a great credit score.  Whereas, I know for a fact that members of the 775+ club tend to use less than 10% of their credit, and often they use just 5% of their available credit.

Thus, the result is a much better credit card utilization figure and that will lead to an improvement in your credit score.  This begs the question, do I do this personally?  Answer: sort of.  I try to pay off my credit cards every two weeks instead.  Why?  Like most of us, I’m busy and I might not remember to pay it off before the closing date each month.  If I miss by a couple of days of the closing date, I’m back to being a regular payer.  For me, it’s been easier to pay every couple of weeks, even every week if things aren’t so busy.  I imagine that as I get into my mobile apps more and more, this will just keep getting easier.

Plus, here’s another issue.  The statement date might be different than the closing date.  Some people recommend paying 2-3 days before the closing date.   This is another reason to adopt my every two weeks strategy.  It’s just easier to figure this out.

One more reminder, I do all this in addition to having all my credit card accounts setup for auto-pay.  The above strategy has nothing to do with paying on time.  It’s all about paying ahead of time.  Auto-pay acts as a backup in case something doesn’t happen – like when I go on vacation.

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5 Responses to “Closing Date and Due Dates Can Impact Your Credit Score – Episode #8”

  1. Michael Zamora on July 28th, 2010 5:16 pm

    I have been recently paying down on credit cards and raising my fico score but yesterday and today two credit accounts were closed by the grantor and they were zero balances. This caused my fico score to change by 5points . Is there anything I can do . What can I do to raise it back up.

  2. VideoCreditScore-Andy on July 30th, 2010 9:34 pm

    This happens and it’s happening more frequently lately. Just keep paying your bills on time and keep balances low and your score should be fine. Often times people see those 5 points return in a few months.

  3. Martin on August 3rd, 2011 2:34 pm

    Hey Andy,

    I’m an expat in the US and found your advice invaluable! Thanks for all the effort you put into this site to make this such a high quality source for credit score information.

    One question, and I apologize if it may sound silly: On what do I actually pay interest?

    in the example above, the closing date is the 25th. So if I pay the full balance on the 21st, the balance that is reported is 195.35. Let’s say my due date is the 5th of the next month. Since I make payments on the 21st, I would have to pay interest on that balance, correct? But if I pay up the entire balance that had accumulated until the 5th on that day, I would pay no interest and have a lower balance to pay up on the 21st day of that month… correct?

    In general, I think it could be very helpful to make an example about how credit card companies calculate interest that needs to be paid, in particular maybe an example with bi monthly payments as you suggest in other posts.

    Thanks a million!


  4. VideoCreditScore-Andy on August 19th, 2011 3:30 pm

    Thanks for the kudos. I’ll workup an example in the next few days. But to summarize, If you pay before the due date, no interest accrues. That’s what makes credit cards a 30 day interest free loan. They should lose money for the banks, but people extend that, so it costs more. The statement date matters less. It’s just the marker date to show you what you owe. If you pay before the 30 days are up, then you are just shortening the 30 day free loan they are giving you.

  5. VideoCreditScore-Andy on August 19th, 2011 3:45 pm

    Arggh, my reply got erased. User error on my part. I will work up an example but the easiest way to think of this is as a 30 day interest free loan. Due date is the end of the 30 days. any payment before the 30 days are up is free of interest. But i will work up an example.

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