Does Paying a Credit Card on Time Improve Your Credit Score?

Getting your credit score as high as possible means handling your finances responsibly in a number of ways, including paying your credit cards on time. Making payments on time reflects your ability to handle your borrowing wisely. However, other factors also play into the ultimate calculation of your credit score.

Timeliness of Payments

The timeliness of your payments accounts for the largest chunk of your credit score, at 35 percent. Paying your credit cards -- and all your bills -- on time is vital to keeping your credit score healthy. One way to make sure your credit card payments are on time each month is to set your accounts up with automatic payments. Most automatic payment systems allow you to select the amount you would like to pay each month.

Paying Early

Paying on time is essential, but it's also essential to pay early if you want to save money on interest and you carry a balance from month to month. Each day you carry a balance, it accumulates interest, so paying toward the beginning of the cycle means that you pay less each month. The savings are small, but over time they add up. Bankrate writer Marcia Passos Duffy points out that a cardholder with a $10,000 balance with a 29 percent interest rate saves about $96 per year by paying on day two of the billing cycle rather than at the end of it. If possible, pay off your entire balance each month.

Late Payments

Since timeliness of payments makes up such a large portion of your credit score, making late payments can be catastrophic. According to MSN Money writer Liz Pulliam Weston, a single payment made more than 30 days late may lower your score by as much as 110 points. Such devastating drops in your score take months, or even years, of rebuilding.

Other Factors

To get your credit score as high as possible, you also need to consider the other variables that make up your score. After timeliness of payments comes debt utilization, which accounts for roughly one-third of your credit score. To maximize your debt utilization, you need to keep your credit card balances under 30 percent of their limits at all times. Another 15 percent of your score goes to your credit history -- the longer you've had accounts open, the better. Credit expansion gets 10 percent. For this category, it's best to open a few new accounts over time to prove that you have the ability to handle new credit responsibly; however, applying for lots of new credit at once actually lowers your score. The last 10 percent is allocated to credit diversity. Having a mixture of installment and revolving loans will boost your score in this category.