Credit score wise, is it better to pay off a credit card balance before any “minimum payment” is due, or just wait until a minimum payment is due?

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by aRedLlama

A variety of factors determine your FICO score, the most widely used credit score.

The nuance here is that you want to wait until the statement cuts then pay the full balance on or before the due date. If you pay the balance in full before the statement can even cut, then the issuer will report $0 to the credit bureaus. Yes, that will be 0% credit utilization which is good in theory, but it also means 0 credit payment history as well – and credit payment history actually happens to be a more important factor in your credit score.

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TPG explains it better than I can:

If you choose to pay your credit card account before your statement actually closes, you’ll have a balance of $0. This will then be reported to the credit bureaus. The next month, you do the same thing and again have $0 reported. If you continue on this cycle, your amounts owed (commonly referred to as your credit utilization rate) will remain at 0%, but your payment history will also be nonexistent. Think about it; because you pay your balance before your issuer can even report your balance to the credit bureaus, it appears that you are simply not utilizing your credit card account(s). Remember that your credit score is a reflection of how well you manage the credit line that has been extended to you, so if it appears like you aren’t using your card, there’s no reason for your score to go up.

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