Almost a year ago, I began automating some bills – charging large bills on my credit card to receive cash back. This has included insurance bills of thousands of dollars and a recent car repair that cost more than $8,000. When I first moved to automated bill pay, I didn’t think about the increased credit card utilization and its effect on my credit score. Since then, I have started sending a check to arrive about the time my credit card is charged. However I recently noticed a “hack” that claims to help you raise your credit score by paying your bill at set times.
What is the 15/3 hack?
The 15/3 credit card hack suggests that if you pay half your credit card bill 15 days before it’s due, and the other half three days before it’s due, your credit score will increase.
Problems with this plan
More payments won’t help your credit score. Some of these websites mistakenly suggest this is due to you making more payments per month. This is not true; the number of payments you make will have no affect on your score. If you pay off the bill in full before it’s due, you’re good. If you make 15 payments and still have an outstanding balance, your credit score will likely go down. Your credit card only reports once per billing statement, not each time you make a payment.
There’s nothing special about 15 or three days. I guess whoever invented this hack thought spreading out the payments would make this seem more palatable to the general public. However, it could as easily be 20 days and 10 days, or seven and three, or whatever combination you choose.
Aiming at the past instead of the future. Most credit cards offer a 30-day grace period. When you pay your credit card bill, you are paying off charges you made a month ago. So if you ran up $2,000 in May and your bill is due July 5th (and you use the 15/3 hack), you’re making half the payment on June 20th and the rest July 2nd. Here’s what happens though: you’re paying off the May charges, but your charges for June are then reported to the credit bureau when the billing cycle ends. If you charged an $8,000 car repair in June, it doesn’t really matter that you paid off half the previous bill – the credit bureaus will likely ding your credit score when this high bill hits due to increased credit utilization.
It’s dependent on when you charge. Even if you follow this religiously, if you charge a large item on the day your billing statement closes, these random payment dates won’t matter. The credit card company will report this large balance and once again the credit bureau may lower your score.
A plan that works
Here’s what I do instead of relying on random days. If I know the bill is going to be uncharacteristically large, I send a check to arrive on or before the charge goes through. In other words, if I have a large insurance payment due July 8th, I send a check for the full amount of that payment to arrive on the day it’s paid by the credit card. This ensures I get my money back reward while keeping my credit utilization low.
What this means is you no longer have to worry about 15 days or three days or remembering the different closing dates on your four credit cards. You’re simply on the lookout for large bills that you want to charge, and you prepay them so your credit utilization doesn’t take a hit.
This too shall pass
As I said before, I only prepay bills that are uncharacteristically large. If we spend $500 extra on something I don’t worry about it. And honestly, if your credit utilization is normally in a set range, it tends to recover quickly after you’ve paid a bill that’s a one-time outlier.
Remember also that if you’re not about to use your credit on a major purchase (house or car) or to open a new credit card account, small changes to your score matter to no one. That doesn’t mean you can ignore your credit. But worrying about whether your credit utilization is increasing from 3% to 13% for just one month probably isn’t worth your time.
Photo by Nikolay Ivanov