How on-time payments affect credit score—and why it's not enough

If you’re carrying a credit card balance in 2025, you’re not alone. Americans now hold $1.18 trillion in credit card debt—near record levels. According to TransUnion, the average borrower owes $6,371. Despite this, the average FICO score in the U.S. sits at a respectable 715. But many people are confused about what actually drives that number.

The most common misunderstanding? That paying your bills on time is all it takes to build great credit. Yes, on-time payments matter. But they’re only one part of a broader system. To raise your score—and keep it healthy—you need to understand what does and doesn’t get reported, how usage affects your profile, and why credit scoring is more nuanced than many assume.

This myth often stems from the way we learn financial responsibility: pay your bills, avoid late fees, and you’re “doing the right thing.” But credit scoring systems are not moral judgments—they’re risk models. They’re designed for lenders, not for consumers. That means the rules they follow prioritize predictability over fairness. So even if you’ve never missed a bill, your score might still stagnate or decline if you’re using too much of your available credit or haven’t diversified your credit mix. Paying on time is necessary—but it’s not sufficient.

A credit score is a three-digit number, typically between 300 and 850, that lenders use to assess how likely you are to repay a loan. The most widely used model is FICO, followed by VantageScore. Your score doesn’t measure your income, assets, or savings—it’s a predictive tool based on your credit behavior.

FICO scores break down like this:

• Payment history: 35%
• Credit utilization: 30%
• Length of credit history: 15%
• Credit mix: 10%
• New credit/inquiries: 10%

Paying bills on time falls under the first category. But it’s not always counted the way you might think.

One of the most important distinctions is this: only certain types of on-time payments are reported to credit bureaus. Your rent? Only if your landlord uses a reporting service. Your phone bill? Usually not. Your BNPL (“buy now, pay later”) plan? Sometimes—but mostly only if you miss a payment.

“People assume every bill counts toward their score,” says Yanely Espinal of Next Gen Personal Finance. “But rent-to-own, utilities, tuition—even if paid perfectly—often don’t make it onto your report.” A 2024 LendingTree survey backs this up: 62% of BNPL users incorrectly believed their on-time payments were building credit. In truth, many of those platforms don’t report positive behavior at all. But they may report if you miss a payment—which means the system penalizes mistakes but doesn’t reward discipline.

After payment history, credit utilization is the next biggest contributor to your score—yet it’s often overlooked. Utilization refers to how much of your available credit you’re using. If you have a $10,000 total credit limit across your cards and carry $3,000 in balances, your utilization is 30%.

Here’s why that matters: FICO scores reward low utilization. Experts recommend keeping it under 30%, and under 10% if you're actively trying to raise your score.

In a 2024 analysis, LendingTree found that people with credit scores above 720 had average utilization rates of 10.2%, while those in the 660–719 range averaged 36.2%. To stay in the top tier, it’s not just about paying off your card—it’s also about keeping usage low during the statement period.

To take control of your score, start with what’s visible to lenders. This means checking your credit reports.

You can access all three of your reports (from Equifax, Experian, and TransUnion) weekly for free at AnnualCreditReport.com. Look for:

• Accounts listed (credit cards, loans, mortgages)
• Payment history per account
• Reported credit limits and balances
• Any late payments, defaults, or collections

If you’ve been paying something reliably and it doesn’t show up? That means it’s not helping your score. You may consider asking the provider about adding rent or utility payments through services like Experian Boost or other third-party rent reporting tools—but these have limits.

Instead of guessing, use this framework to evaluate your credit behavior:

1. Reportable Habits

Focus your energy on the accounts that get reported:

• Credit cards
• Auto loans
• Personal loans
• Mortgages
• Student loans

If you’re paying something monthly—like a gym membership or BNPL loan—and it’s not showing up on your credit report, it doesn’t help your score.

2. Usage Strategy

Keep utilization low, not just eventually—but at statement time. Pay down cards before the statement closes, not just on the due date.

For example: if your statement closes on the 25th and you pay off your balance on the 26th, the balance reported to the bureau may still be high. To look like a low-risk borrower, timing matters.

Tip: Set alerts a few days before your billing cycle closes, and pre-pay to lower your reported balance.

3. Score-Age Mindset

Good credit is a long game. Keep old accounts open (unless they carry high fees) and avoid applying for new credit frequently. A mix of account types helps, but only if they’re well-managed.

These are common credit myths that can cost you:

“Closing a card helps my score.”
Not necessarily. Closing a card reduces your available credit, which can spike your utilization percentage—even if your debt hasn’t changed.

“I need to carry a balance to build credit.”
False. You can pay off your balance in full every month and still build excellent credit. In fact, interest charges only hurt your finances.

“Checking my credit hurts my score.”
Soft checks (like checking your own score or using credit monitoring apps) don’t affect your score. Only hard inquiries—like applying for a loan—temporarily impact it.

“Paying utilities on time builds credit.”
Sometimes. But in most cases, unless you’ve enrolled in a reporting program, they aren’t reported unless they’re sent to collections.

If your balances are high and your score is stuck, focus on the two levers you can move quickly:

1. Pay down balances below 30% (or better, below 10%)
2. Request credit limit increases without taking on new debt

Many card issuers will increase your credit line after a few months of on-time payments—this lowers your utilization without you having to pay off more right away. Just be sure not to use the new limit.

Also consider balance transfer offers to consolidate and reduce interest, but only if you’re committed to paying off the debt aggressively during the promo period.

• Do I know which of my payments are actually building my score?
• Am I keeping my utilization under 10%—or just under the limit?
• Have I checked all three credit reports recently for gaps or errors?

Credit isn’t just about borrowing—it’s a financial reputation score. You don’t have to play perfectly, but you do need to understand the rules if you want better terms on loans, credit cards, or housing applications.

Paying your bills on time is foundational. But when it comes to credit scores, it’s not the whole story—and assuming it is can cost you. Your score is a system. It reflects patterns, usage, and risk signals—not just reliability. That’s why understanding utilization, visibility, and timing can make a bigger difference than simply being disciplined.

The good news? You don’t need to be perfect. But you do need to be strategic. Creditworthiness isn’t just about how responsible you are—it’s about how clearly the system can see it. And clarity starts with knowing what counts.

A strategic credit plan takes the long view. It accounts for how each action—applying for a new card, consolidating a loan, increasing a limit—may shift your score’s composition. If you're planning to take out a mortgage or finance a car within the next year, knowing how your credit usage looks two months before the application can make a tangible difference in your interest rate and approval odds.

Think of your credit score not as a finish line, but as a readiness signal. With every choice, you’re sending a message to lenders—not just about how you pay, but how you plan. The more aligned that message is with how the system measures risk, the more power you have to unlock better terms on your own timeline.