This is one of the most frequently asked questions and one of the most misunderstood aspects of credit reports and credit card bills. To understand why your credit card balance never shows as being paid in full on your credit reports you need to understand how credit card information is reported to the credit bureaus in the first place.
Credit reports and credit card statements
Credit card issuers send the credit bureaus the same information that is used to create your credit card statement. This information includes the credit limit, the amount you paid, amount owed, and whether you paid on time. Your credit report contains the amount you owe as of your last statement, not the amount you owe after you paid the bill. And, it certainly doesn’t show you actual current balance.
For example, if you owe $1,000 on your credit card statement, this is reported to the credit bureaus. If you pay the amount in full after you receive the bill, that doesn’t change the credit report, it still shows that you owe $1,000 that month. Even if you pay your bill in full each month, you will show a balance on your credit report, as long as you continue to use the card for purchases. Your balance becomes zero when you pay your bill, but if you have used your card since you paid your bill, you will still have a balance. The cycle continues.
How to get your balance to zero
There are two ways to get your credit card balance to zero:
1. Pay the account in full and do not charge anything on the card for at least one full billing cycle.
2. Pay your bill at least 7 business days before the end of the cycle and do not charge anything on it until the new cycle begins. Remember, your balance is a product of new charges, fees, interest and revolved amounts minus payments and credits. If you can get all of that to equal $0 then your credit report will reflect that you have no balance on your credit card account.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, founder of www.creditexpertwitness.com and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. You can follow John on Twitter here.