Making minimum payments is better than not paying any amount towards your credit card bills. In fact, even if the customer can make only the minimum payment every month, doing so on a consistent basis will not affect his credit rating so badly. But, customers who miss out now and then on making the minimum payments will face a decrease in their credit score.
Your monthly payment does not directly impact your credit score, but it affects your credit utilization ratio. Using more of your credit limit will result in the lowering of your credit score. This reduction is only temporary and reducing the outstanding balance will help your credit score bounce back. But, making only the minimum payment will reduce your balance only by a very small amount. Thus, the credit utilization will continue to impact your credit score negatively. Also, if you continue to make additional purchases reducing your credit limit, then your credit score will hurt drastically. This is because your outstanding balance will increase and your credit limit will lower, thus increasing the credit utilization ratio. On the other hand, if you have a low outstanding balance, say 30% of your credit score and you make the minimum payment, then your credit utilization ratio will not hurt your credit score.
The revolving accounts and latest credit report of customers contain important information, such as credit rating, amount due, past due, the amount paid and balance. The credit rating and balance are the most important parameters that determine a customer’s credit score as they contribute towards their repayment history and credit utilization ratio. The details about the amount due and the amount paid will indicate that the customer has paid the balance completely within the set time frame. However, the number of issuers who report this data currently stands at only 70% of the total.