A credit score is a number generated by the credit bureau that factors in the borrower’s repayment history, average age of all accounts, how much debt has been incurred vs the credit limit, and what types of debts are owing (e.g. mortgage, LoC, credit card, etc.). The key factor in your question is the repayment history.
To build credit history with the reporting bureaus it’s not enough to just use a credit card and pay it on time. The borrower has to use it, wait for the statement to be generated, and then pay it.
This is because the credit card company isn’t constantly reporting to the credit bureaus. They only do it once a month. They basically say whether or not the borrower made the minimum payment, how much they’ve borrowed, and their credit limit. This information all comes from the statement. The statement is not the constantly updating record of transactions you see when you log in online. It’s the PDF or paper document they provide monthly.
The number of transactions for that month doesn’t matter, nor does the method of settling the debt (returning the item vs paying the bill). If the borrower uses the card and settles the debt entirely before the statement is generated, that amount is not reported to the bureaus because there’s nothing owing at that time.
The reverse is also true. If the borrower is late making the minimum payment, but the payment still posts to the account before the next report goes out, the report will show that the minimum payment was met. It only shows 30, 60, 90, days past due for late payments.
Just a single point of order: charges can be reported off cycle, i.e. not when the statement is generated but within a few days of the transaction. I thought it was monthly too but monitoring has shown otherwise.
It won’t hurt. It probably won’t help.
A credit score is a number generated by the credit bureau that factors in the borrower’s repayment history, average age of all accounts, how much debt has been incurred vs the credit limit, and what types of debts are owing (e.g. mortgage, LoC, credit card, etc.). The key factor in your question is the repayment history.
To build credit history with the reporting bureaus it’s not enough to just use a credit card and pay it on time. The borrower has to use it, wait for the statement to be generated, and then pay it.
This is because the credit card company isn’t constantly reporting to the credit bureaus. They only do it once a month. They basically say whether or not the borrower made the minimum payment, how much they’ve borrowed, and their credit limit. This information all comes from the statement. The statement is not the constantly updating record of transactions you see when you log in online. It’s the PDF or paper document they provide monthly.
The number of transactions for that month doesn’t matter, nor does the method of settling the debt (returning the item vs paying the bill). If the borrower uses the card and settles the debt entirely before the statement is generated, that amount is not reported to the bureaus because there’s nothing owing at that time.
The reverse is also true. If the borrower is late making the minimum payment, but the payment still posts to the account before the next report goes out, the report will show that the minimum payment was met. It only shows 30, 60, 90, days past due for late payments.
Source: Capital One employee training
Just a single point of order: charges can be reported off cycle, i.e. not when the statement is generated but within a few days of the transaction. I thought it was monthly too but monitoring has shown otherwise.