FRS Credit Repair

Why Paying Your Credit Card On Time Isn’t Enough

June 14, 2018
Shawn Lane
Consumer Credit Expert

Basic credit common sense tells you that paying your bills on time is essential to maintaining a good credit rating. What you may not realize, however, is that your payment history is only one component of good credit. Payment history absolutely matters, but keeping your payments on time alone is not enough to earn and keep great credit scores. Great credit goes much deeper than that.

The 2 Primary Ways Your Credit Card Impacts Your Scores

Credit cards have the potential to influence your credit scores more than some other types of accounts. The reason why this is true is due to the fact that a credit card account can impact your credit scores in 2 big ways – your payment history and your utilization.

Payment History

Your payment history on any account (credit card or otherwise) will have a big influence over your credit scores. FICO credit scoring models base 35% of your credit scores on the “Payment History” category of your credit reports. As a result, even the occasional 30 day late payment on a credit card account can have a serious negative impact upon your credit scores.

If your goal is to improve your credit scores or even to maintain the good scores you have already earned, it is crucial to break the late payment cycle. As you keep your credit card payments on time, these accounts have the potential to become powerful credit building tools, which can work in your favor.


Credit scoring models like FICO are also designed to focus on your revolving utilization ratio. Revolving utilization ratio is a term used to describe the percentage of your credit limits being used (based upon the information which appears on your credit reports).

Believe it or not, the utilization on your credit card accounts are nearly just as important as making your monthly payments on time. This is because FICO bases 30% (nearly 1/3) of your credit scores upon factors from the “Amounts Owed” category of your credit reports, primarily upon the revolving utilization ratios you carry on your credit card accounts.

Here is an explanation of how your revolving utilization ratio is calculated. Take your credit card balance, divide that number by your total credit limit, and multiply by 100. The answer is your revolving utilization ratio.

$500 (Balance) ÷ $1,000 (Limit) = 0.5 X 100 = 50% Utilization

Credit scoring models are designed to reward you whenever the utilization ratios on your individual credit card accounts and your overall or aggregate utilization remains low on your credit reports. This means that if you do not carry a balance on your credit card accounts from month-to-month you will not only save money in interest, but your credit scores will likely benefit as well.

Keep in mind that your credit card company will only report your balance and payment history to the credit bureaus once a month, normally at the time when your statement is issued. Therefore, in order for a $0 balance to appear on your credit reports you will need to pay off the balance in full prior to the statement closing date on your account. Because utilization is so influential over your credit scores, paying down your credit card balances can often be an effective way to give your credit scores a boost.

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