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Can TikTok’s 15/3 Rule Really Improve Your Credit?

TikTok’s 15:3 Rule; Does it work?

Whether or not you have TikTok downloaded on your phone, you probably know about the popular social media app. With more than one billion active users worldwide, the video platform has dug into the cultural zeitgeist. You can’t escape the op-ed pieces about how the app is ruining the youth’s attention spans or how TikTok trends trickle down to other social media, like Instagram, YouTube, and even Facebook.

People download the app to access endless videos, most of which show viral dances, comedy sketches, or supercuts of people performing their hobbies. But in this vast ocean of superficial content, the app also has a practical side, where you can find advice on any topic, from health and home renovations to finances.

Savvy scrollers looking for financial advice tap into FinTok. Short for financial TikTok, FinTok covers a variety of topics related to money management and is home to many viral money-saving techniques. It’s where you go when you want to find secret deals on airfare or learn how to balance your budget.

The 15/3 Rule is the latest trend to go viral. With a staggering 11.4 million views and counting, FinTok’s content creators, also known as “finfluencers,” tout this rule as a credit payment system that improves your credit score.

But what exactly is the 15/3 Rule, and does it live up to the hype? Before we find out, you must learn a basic principle about credit cards and lines of credit: the credit utilization ratio. This provides the foundation of the rule entirely.

What is the Credit Utilization Ratio?

Let’s back up even further. First, let’s talk about your credit score. Five major factors come together when generating your history and three-digit number.

Payment history takes the top spot in this list, as it shows you can handle paying bills on time. Second on the list is credit utilization, as it shows how you manage revolving accounts that give you ongoing access to cash. The other factors (types of accounts, age of accounts, and length of history) also play an essential role in your score. But for today, we’ll focus on the utilization ratio.

Your credit utilization ratio is a percentage showing how much of your available credit you use on revolving accounts like credit cards or lines of credit. Determining your ratio is simple: divide your outstanding balance by your account’s total limit, then multiply the quotient by 100.

Let’s say you have a line of credit worth $12,000, and your balance shows $3,000. Following the rule above, your ratio would be 25%.

Even if you’ve never heard of this ratio, you probably already know its core rule. You don’t want to get to 100%. Maxing out your account isn’t a good idea because it signals to reporting agencies and lenders that you may have poor money management.

You may have a problem controlling your spending, so you charge too much on credit. Or, you may have run into a rough patch, losing your job the same month you need to repair your car. While it’s not your fault you must rely on credit in an emergency; it still shows you are struggling financially.

What about if you have a ratio of 25%, as seen in the example above? This number isn’t bad in the grand scheme of things. Ideally, you want to keep your ratio below 10%; however, some financial advisors say anything below 30% can effectively manage your score, too.

Keep these lessons in mind as we explore the 15/3 rule.

What is the 15/3 Rule?

The 15/3 rule is a two-step method of paying any revolving credit account.

Step #1 |The 15: The first step involves paying off the majority of your account’s balance a generous 15 days before your statement date. Your statement date isn’t the day your payment is due; it’s the date your account issuer generates your monthly statement.

Step #2 | The 3: The second step instructs you to pay the remaining balance three days before the statement date.

FinTok’s rule is an alternative to the typical advice. Usually, financial advisors and online lenders like Fora recommend paying off your full balance whenever possible. Here’s why:

  • Paying off your entire balance will free your limit if you need this cash in an emergency.
  • Clearing your balance to zero may also reduce how much interest you earn on purchases.
  • Lastly, total payments will ensure you keep a low utilization ratio, which may help manage your score.

Barring a full payment, you should aim to pay as much of your balance as possible. While you can cover the minimum payment, leave this as a last resort when money’s tight.

Sure, the minimum payment ensures you avoid a late payment. But it also keeps you in debt longer. The minimum is a small fraction of your balance, so it will take you longer to pay off debt using just this minimum. You can see just how much longer making the minimum keeps you in debt by visiting this calculator.

Why Finfluencers Champion the 15/3 Rule

It’s all about timing. The major credit bureaus collect account information that affects your credit score (like payment history and balances) at different times throughout the month.

Paying twice before the statement date reduces your balance in increments. Finfluencers believe you can hedge your bets by lowering your balance twice a month. If you’re lucky, they think this means you can lower your balance before your creditor checks your balance.

Does the 15/3 Rule Deliver Results?

Despite its viral popularity, the efficacy of the 15/3 Rule has come under scrutiny on several fronts:

Reporting of Frequency

Creditors typically report account information once per month. These companies usually report your balance following the statement closing date, and no earlier. When they do, they check to ensure you made a payment on time.

In other words, you can make as many or as few payments before this date as you want. The only thing that matters is how much you manage to pay. Paying off all your balance results in a 0% utilization ratio.

Arbitrary Timing

The specific timing of payments — 15 and 3 days before the statement date — holds no inherent significance. Ultimately, the due date remains the critical deadline for your account.

When 15 and 3 days present so prominently, you have to wonder about the value of this rule entirely. What’s their purpose if it means nothing? Can you trust this rule if the 15 and 3 days can be exchanged for 14 and 2?

Are There Any Advantages To Following This Rule?

While the 15/3 Rule may not directly impact your utilization ratio as advertised, the concept of gradually reducing your balance holds merit. Although you may make smaller, more frequent payments by following this TikTok hack, it still teaches you to pay off your balance by the due date. This comes with many benefits.

Firstly, paying down your balance will help you reduce your utilization ratio, which may add a positive history to your credit report.

However, it’s important to note that some lenders may not report positive payment histories to the major credit reporting bureaus. However, all lenders eventually post negative payment histories.

Of course, the 15/3 Rule states that you must make prompt payments to keep these negative entries off your file, even if it doesn’t add positive payment history to your name.

Is the 15/3 Rule Harmful at All?

On one hand, this TikTok trend encourages responsible payment timing. But on the flip side, it can complicate your financial situation, especially if you have more than one revolving account. Keeping track of the 15- and 3-day schedule across multiple accounts is complex, and it’s more challenging if you make frequent monthly charges.

It can also misrepresent how easy improving your credit score can be. In reality, no hard-and-fast rule will instantly boost your score. That’s because your score is a representation of five distinct factors. While your utilization ratio is an important factor, it doesn’t work alone.

You can have an amazing ratio and still damage your credit by ignoring the other five factors that affect your score.

The effects of a “good” ratio are also tempered by what’s already in your file. While keeping your score below 10% will reflect well on your character, it won’t mean much if you have a charge-off or bankruptcy in your history. Even frequent late payments can reduce the impact of a low utilization ratio.

A Note on Social Media as a Source of Financial Information

This rule represents how misleading information can be on FinTok and social media. While some good-hearted and informed people try to share fact-checked advice for free, others can unintentionally parrot incorrect advice in videos. Some bad actors can even deliberately spread misinformation to scam the system.

Unfortunately, it isn’t always easy for the average user to determine the difference between these creators and their content. People who purposefully post fake info do it for the views, so they’ll make sleek videos that seem legit. If you follow these tips without questioning them, you can fall into financial hot water.

Critical thinking is key when scrolling through TikTok for financial advice because you never know whether the content is legitimate. While the financial gurus at CNBC fact-checked five popular videos and found that all were made in good faith, The Vox found blatant misinformation on the social media platform.

Watch FinTok with Discretion

When it comes to FinTok, both genuine and misleading content can end up on your FYP. You must determine whether a video is worth watching or scrolling past.

For established adults with a good grasp of financial literacy, discerning fact from fiction might be easy. However, TikTok’s main user base is Gen Z. One-quarter (25%) of all TikTok users are between 10 and 19, while nearly half (47%) are under 30.

At these young ages, teens and young adults may not have the financial experience to critically scroll through FinTok. They’re more vulnerable to misinformation because they lack real-world experience handling money or managing credit.

The Takeaways:

Whether you opt for one lump sum payment or prefer smaller, more frequent payments, the ultimate goal remains the same: paying down your debt.

While the 15/3 Rule may not be the magic bullet for credit improvement, its structured debt repayment approach could offer some individuals a more manageable alternative. For others, it could become a disorganized payment strategy that overcomplicates their bills.

Let’s face it — there’s rarely a one-size-fits-all solution in personal finances. The effectiveness of strategies like the 15/3 Rule may vary depending on individual circumstances and financial goals.

Ultimately, responsible credit management involves a combination of timely payments, prudent credit utilization, and strategic debt repayment. While FinTok can be a valuable source of inspiration and knowledge, it also shares misinformation that offers zero benefits to your financial situation.

If you’re on TikTok, using the platform for financial tips and education, be wary of the videos you watch. You’re in sole charge of your FYP, so it’s up to you to vet content creators and their messages. It’s essential to approach financial advice found on social with a critical eye and tailor strategies to suit your specific needs.

So, as you navigate the complex world of social media and financial advice, remember that informed decisions and disciplined habits are the true keys to long-term financial health, regardless of the latest viral trends.

Bottom Line:

Regarding the 15/3 rule, some people might prefer to wipe out their debt in one payment; you might like making smaller, more frequent payments. But making these payments 15- and 3-days out from your statement date holds no significance for your credit health. Do whatever works for you, as long as you pay on time.

Featured Image Credit: Photo by cottonbro studio; Pexels

About Due’s Editorial Process

We uphold a strict editorial policy that focuses on factual accuracy, relevance, and impartiality. Our content, created by leading finance and industry experts, is reviewed by a team of seasoned editors to ensure compliance with the highest standards in reporting and publishing.

CEO of SearchEye and Financial Author at Due
Chris Porteous is a growth marketer, helping freelancers and small businesses become financially independent. Previous to this, Chris worked at prestigious financial institutions including: Goldman Sachs, UBS Securities, Garrison Hill Capital Management and DBRS. He is a frequent contributor and has been featured in publications, including: Entrepreneur, Forbes, Inc, Zerohedge, Lifehack, and more. Fun fact, his previous company Our Paper Life (that was acquired), built the largest cardboard beach in the world.

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