NEW YORK (
TheStreet) -- So you really want to get ahead of your debt?
Then start maximizing your monthly credit card payments.
Financial consumers who do that have "significantly lower delinquency rates" on not just their plastic payments, but on their mortgages and auto loan payments as well.
Go in the opposite direction and pay only the minimum amount due on your credit card bill and you're more likely to experience higher loan credit payment delinquency rates.
That's the takeaway from
a study by TransUnion
, the Chicago credit reporting agency.
TransUnion says it all comes down to a pair of terms for financial consumers, and which one they're more likely to be -- a "transactor" or a "revolver."
"TransUnion's study has confirmed the conventional wisdom that transactors -- those consumers who pay off their entire balance each month -- are better risks than revolvers, i.e. consumers who only pay a portion of their balance, and moreover has quantified just how big an increase in risk revolvers represent," explains Ezra Becker, co-author of the study and a vice president of research at TransUnion. "Just as importantly, the study revealed that not all revolvers are equal: Those who pay more than the minimum on their credit cards, even if they don't pay off the full balance, present less risk across product types."
Even if you're paying a few dollars more on your credit card payments (although the more dollars, the better), creditors are more likely to view you as a positive credit risk, Becker says.
"Our findings are good news for consumers, particularly those who only pay off portions of their credit cards each month. Even if they can't pay the full balance, they may now find that lenders view them in a more positive light depending on the amount they do pay."
Fortunately for credit card companies, and for the U.S. economy, 18% of card consumers only pay the minimum amount due every month.
All told, 42% of U.S. credit card consumers (the transactors) will pay off their bill in full every month, while 40% will pay a partial amount, but more than the minimum payment due
It's no secret that paying only the minimum amount of your credit bill sends a strong message to the card company -- and to other creditors -- that you're stretched for cash and probably not a great credit risk.
But the TransUnion study adds more clarity to the issue -- that card consumers who pay more than the minimum are more likely to pay all of their bills in time, making them a better financial bet for lenders and creditors.
Thus, if you're only paying the minimum amount due on your credit card bill, start adding a few bucks to that amount and keep adding a few bucks every month.
That way you're showing creditors you're a good credit risk and raising yourself out of debt in the process.