The “15/3 credit card payment hack” is one proposed method for helping consumers improve their fico scores. Owning a credit card comes with many financial responsibilities. By making purchases with their cards, paying them off, and earning rewards, cardholders can establish strong credit—which will help them later when applying for items like auto loans or mortgages.
Anyone may adhere to the 15/3 plan, but it requires some self-discipline and control. The idea is to lower your credit use rate while improving your credit score.
The 15/3 Hack: How, Why, and When It Works
Even while improving your credit score typically takes months, there are several techniques that, under the appropriate conditions, can offer you a speed boost. A good example is the 15/3 credit card payment hack.
What exactly is the 15/3 Credit Card Hack?
It involves making two credit card payments per month as part of a credit optimization strategy called the 15/3 credit card payment hack. You make one payment 15 days before your statement date and another three days before it (hence the name).
Your statement date is the last day of your credit card billing period, after which your card issuer will give you a summary of your activity and outstanding balance. Billing periods are typically 30 days long, though they do not always correlate to calendar months.
It is important to note that your statement date is distinct from your payment date, which is the day when you must pay off your statement balance to avoid accruing interest charges. Typically, 20 to 25 days from the statement date (20 days is the legal minimum).
The 15/3 credit card hack would operate as follows:
Assume John’s credit card has a $2,000 credit limit and a 30-day billing cycle. The current billing period for him runs from June 15th to July 15th. He has a $1,000 credit card balance on June 30th, 15 days before his statement date.
He spends $100 over the next three days before his statement date, which his card issuer will record and publish as his billing period balance. The 15/3 credit card payment hack can help you minimize your reported amounts outstanding, which account for 30% of your FICO score (making it the second-most important factor).
It lowers your credit card utilization ratio, which is the percentage of your available credit you’ve utilized to make purchases at any particular time. It is equivalent to your outstanding balance divided by your credit limit.
Credit card companies report your utilization ratio to the credit bureaus on your statement date, and the 15/3 payment schedule favors low balances on that date.
As an example:
According to the example above, on his statement date, John had a $100 credit card balance and a $2,000 credit limit. $100 divided by $2,000 equals 5%, which is his credit card utilization ratio.
Your credit score will generally be better the smaller your ratio is. If you show lenders that you max up your credit cards every month and routinely have a utilization percentage close to 100%, it suggests you’re more likely to overspend, miss a payment, or default.
There is a consensus that 30% is the maximum ratio you can get away with, but the ideal range is usually between 1% and 10%. Even though a 0% ratio might not be optimal, it will still be far better than a high ratio. A consumer’s credit utilization rate is 7 percent on average for those with FICO scores over 795.
If you require a new vehicle and your credit is holding you back, contact us, and we can help. Email: info@ontariodrivez.com or Phone: 905-956-4700
Also Read: How can you get a car loan in Canada if you have a bad credit history?
