Sometimes a grain of truth in a financial matter can turn into something simply misleading. One example is the 15/3 credit card payment trick – or hack – that you may have seen touted on the internet and social media as a secret tactic to improve bad or poor credit.
The 15/3 hack claims that you can dramatically improve your credit score by making half of your credit card payment 15 days before your account statement is due and the other half payment three days before.
The problem is that it doesn’t work.
“Every few years, nonsense like this gets bigger, but there’s no truth to it,” John Ulzheimer, an Atlanta-based credit expert, said in an email. . Ulzheimer worked for FICO FICO,
and Equifax EFX credit bureau,
The number of payments you make in a credit card billing cycle – a month – doesn’t help your number of on-time payments, a factor in widely used credit scoring models. You will get credit for only one one-time payment during that month. And there’s nothing magical about 15 days and three days before your due date. In fact, it is then too late. At 15 days before your due date, your statement is already closed and your credit card company has probably already reported your information to the credit bureaus.
What is true about credit card payments and what can help? Make multiple payments in a month could temporarily improve your credit scores by making it look like you’re using less credit, but not in the way described by the 15/3 hack.
What the 15/3 credit hack claims
Many YouTubers, blog posts, and short videos on TikTok claim that 15/3 is a surefire secret way to boost credit scores.
We have not been able to identify the author of the 15/3 credit card payment method, but that is usually how it is told in these spaces. Your credit scores will increase significantly if you:
Make half payment 15 days before the expiry date of your credit card. If your payment is due on the 15th of the month, pay it on the 1st.
Pay the second half three days before the due date.
Some versions of Rule 15/3 change the statement closing date to the payment due date. The statement closing date is approximately three weeks before the payment due date. Targeting the closing date could mean making three payments.
Make a payment 15 days before the statement closing date. (Not necessarily half because you don’t know what half is yet. You’re still using the card during the billing cycle.)
Make a payment three days before the statement closing date.
Pay off anything left over after the statement closing date but before the due date so you don’t pay late fees or interest. This amount would be the amount you charged during the last three days of the billing cycle.
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Why the 15/3 credit hack is fake
The main problems with the 15/3 hack:
- Incorrect date peg. Typically, on or around your statement closing date (not the payment due date), your credit card company reports to the credit bureau or bureaus with information such as your balance and credit limit. He only does it once a month. Your due date comes about three weeks after that. Targeting the due date therefore makes no sense. Making a payment 15 days and three days before the credit card’s due date, as the 15/3 hack suggests, is too late to influence credit reports for that billing cycle.
- Multi-payment myth. You don’t get extra credit, so to speak, if you make two payments instead of one or if you make a prepayment. Your creditor only reports to the bureaus once a month.
- 15/3 is random. If you use the 15/3 definition to peg payments to your closing date, this can help, for reasons we’ll discuss below. But 15 and 3 are irrelevant. You might as well make a one-time payment before the closing date. The creditor simply reports your balance at the end of the billing cycle.
“It is irrelevant when you make the payment or payments prior to the reporting closing date,” Ulzheimer said. “You can make a payment every day if you want. Fifteen and three days is no different than paying a day or two before the statement closing date.
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What is the truth ?
The grain of truth in the 15/3 hack is that use of credit account for credit ratings.
Credit usage is simply the amount of credit you use compared to the amount of credit you have. Scoring models give you a higher score if you have a lot of available credit, but use very little of it.
Your credit score is a snapshot in time of your creditworthiness. Deliberately reducing your usage on a certain date is like applying lipstick before the photo is taken.
But your effort to optimize your usage only lasts for a month – until the next month, when your creditors report your balances and limits again and you have a new usage ratio. So unless you’re going to apply for a loan or otherwise need to show a good credit score by a specific date, your efforts have been wasted.
It’s like putting on a nice suit but staying home alone. No one saw it, nor cared.
Credit Utilization Ratio Details
For a single credit card, the relevant dollar figures are your last reported balance versus your last reported credit limit. If you use $1,000 of a $2,000 credit limit on the card, you have 50% credit utilization, which is considered a bit high.
Generally, credit scores respond best to less than 30% utilization, and less than 10% is ideal. With our example of a $2,000 credit limit, that means your balance must be less than $600 or $200, respectively. Of course, that’s not possible for everyone, especially not those with relatively low credit limits. A $500 credit limit can quickly run out in a month.
Credit utilization accounts for almost a third of your credit score – 30% in the popular FICO score model. So, reducing your usage can, in effect, tweak your scores. But with credit cards, your usage goes up and down over the month as you make charges and pay them back.
Overall, the 15/3 hack attempts to improve the look of your use, which is a good goal and standard advice. It just misses the mark by offering the wrong time stamp and an irrelevant number of days before that time stamp.
“It’s not a novel or some kind of secret rating system hack,” Ulzheimer said.
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What really helps your credit score
Your credit score is affected by these factors, and generally in this order of importance, according to FICO:
Use of credit.
Length of credit history.
Mix of credit types.
Recent credit applications.
While the 15/3 hack doesn’t help your credit directly, it might help indirectly if it keeps you disciplined to pay your credit card bill on time. Or, for example, maybe it helps you better sync your payments with your paychecks.
But paying early under the 15/3 rule generally has no merit.
“The truth is, paying your bill before the due date will never increase your scores by a drastic amount,” Ulzheimer said.
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Gregory Karp writes for NerdWallet. Email: [email protected] Twitter: @spendingsmart.