Ask Jean

Ask Jean Thursday: More than the Minimum

Posted by Jean

A couple months ago I answered a question from Nancy in Texas who wondered what effects canceling a credit card would have on her credit score. In response, Jacque in Colorado asked the following:

“Is there an amount to overpay on a credit card that helps your credit score? For example is paying double the minimum due best or does any amount help?”

Answer: In short, no, overpaying on a credit card will not directly affect your credit score. “Paying the minimum or more than the minimum doesn’t have a direct impact on your scores because that level of detail is not reported to the credit bureaus,” says Credit.com’s John Ulzheimer.

What’s the best way to improve your credit score? Paying down your debt. “You can improve your scores by paying your debt down, which generally requires more than a minimum payment,” says Ulzheimer.

Aside from paying down your debt, there are other things you can do to pump up your score. Here are a few steps you can take to give it a boost:

Cut, don’t cancel. If you have a card that you rarely use, don’t cancel it. The longer your relationship with your lender the more beneficial it is to your score. If having the card in your possession is too much of a temptation, cut it up, don’t cancel it.

Be punctual. 35% of your credit score is based on our payment history and even one late payment can ding your credit score. One of the best ways to stay on top of your payments is by setting up automatic bill payment.

Have a variety of debts. If you have a mixture of credit cards and other types of loans (car loans, student loans, etc.) it proves to lenders that you can manage a variety of debts.

Keep your balances low. It’s a good idea to make sure that you’re not running up balances on your cards. Aim to use less than 10% of the total credit you have.

Know where your credit score stands. Once per year, each of the major credit scoring bureaus (TransUnion, Equifax and Experian) will provide you with a copy of your report. Visit AnnualCreditReport.com to get yours.