Even if you dutifully pay off your credit card balance each month, there’s an oft-overlooked way to optimize your credit score—by making debt payments before your balance is reported to the credit bureaus. Many people assume this is the payment due date, but it’s actually the closing date, and not knowing the difference between the two can hurt your credit score. Here’s a look at why the closing date matters.
Payment due date vs. closing date
As a credit card user you’ll be most familiar with the payment due date, which is when you’re expected to pay off at least some of your credit card debt (usually 1-3% of total statement balance, including interest and fees) for a 29-31 day billing cycle, after a 21-25 day grace period has elapsed. This payment due date will always be on the same date each month, and it’s the most important date to remember, as failing to pay it will incur late fees or higher interest rates.
However, the payment due date, while important, is unrelated to the date when your current financial situation is actually reported to the credit bureaus (the big three are Equifax, Experian and TransUnion). Instead, that’s known as the closing date, and it marks the last day of the current billing cycle. This is the day on which your debt balance is actually reported to the credit bureaus.
For an example, let’s say your payment due date is the 10th of the month, and your closing date is on the 14th. Knowing that your payment date is on the 10th, you might decide to pay off my full balance on a card with $1,500 credit limit, because you have the funds to do so. However, let’s say you decided to draw $500 in credit on the following day. Unless you pay it off before the 14th, the amount of total debt reported to the credit bureaus would be $500, not $0, as you’d still within the current billing cycle (the payment due date applies to the previous billing cycle, plus a grace period).
Why is it bad to carry debt on your closing date? Well, thirty percent of your credit score is determined based on how much debt you’re not using—otherwise known as your credit utilization. The less of your available debt you use, the better it is for your credit score, as it suggests that you’re a responsible borrower. Conversely, using more than 30% of your available credit will negatively impact your credit score. (In the scenario described above, the $500 debt on a $1,500 credit limit reported on the closing date would have bumped your credit utilization over 30%).
Aside from credit utilization, timing your purchases around the closing date can save you you money, too. For example, holding off on a big-ticket purchase until one day after the closing date would bump it into the next billing cycle, which would buy you more time to pay back the balance before the interest kicks in.
How to determine your closing date
You probably won’t see your upcoming closing date in your credit card billing statement, and the total billing cycle can vary between cards, which makes determining your closing date a bit tricky.
Your best bet is to simply call your lender and ask them for previous closing dates, which should give you an idea of when you should typically make a payment to get a negative balance off the books. In my case, my lender’s recent monthly closing dates almost always land on the 14th, except for one month in which it was on the 15th. For me, that’s as much as I need to know; I’ll simply think twice about using the card for big purchases in the middle of the month.
However, if you want to be more precise, you can calculate an upcoming closing date by adding the number of days in your billing cycle to the previous account statement closing date included in your billing statement, per The Balance.
Most borrowers make minimum payments on the payment due date to avoid late fees and interest. But if you want to be a bit more strategic, knowing your closing date can help you boost your credit score or buy you more time to pay off a big purchase without paying interest.