Do I need to pay off a credit card statement balance and recent activity to build credit?

Question

When I recieve the statement of my credit cards, it tells me the statement balance for example is $100. It also shows recent activity since my billing cycle ended, for example lets say $25. I have always paid the $125, however my wife recently told me that you only need to pay the statement balance, the $100, and it effects your credit the same way. I told her that it is better for your credit score to pay off the full amount, statement balance and recent activity, in full.

Is this just a matter of whatever floats your boat, or is one way better for your credit than another?

Answer 1

As long as you always pay the "Balance Due" on your statement then you are okay.

The "Recent Activity" is there for those who has previous balance and wish to pay off the whole thing without accumulating any more interest. The interest is calculated based on every charge since the first occurance of an unpaid balance - which include recent activity.

If you have always paid off everything and has no finance charge, you only need to pay the statement balance.

If you currently accuring interest, then you will need to pay the statement balance plus all recent activity in order to avoid additional interest.

Having a balance doesn't necessarily hurt your credit scores. Assuming that you have reasonable credit (debts and potential debts) for your income, then paying the minimum balance each month is good and paying the statement balance is even better.

Answer 2

typical factors for your credit score are as follows:

how much open credit you have compared to what you say your income is

how many of your cards are below 50% of the open limit

making sure that some kind of minimum payment is on time, all the time

sometimes, having too many open lines with no balances can lower your ability to get funding, because of what you "can" access

the higher the amount that you are able to pay off in a timely manner makes you look better. holding small balances won't necessarily kill your score though, but you probably don't get any interest break, as it will always show that you have some balance and then you don't get a grace period.

Answer 3

Credit scoring on credit cards is more complex than most people realize. I just wrote an article on this for a group of newspapers.

Except for Capital One and Providian (WaMu bought them) the following is true:

having a balance at 50-73% of the credit limit gives you second best scores on that account.

Having a balance below 48% of the credit limit gives best scores for that account.

It also helps to pay more than minimum and also to pay as soon as the statement arrives rather than later. These are little known secrets that add points to credit scores.

Go to www.LearnAboutCredit.com

Answer 4

As far as your payments, you need only to pay the "required payment" not the balance. The only time balance comes into play is with your utilization ratio-- if you are over 45% or so of your limit.

If the card is, say, $1000, and your required payment is $25, and your total balance is $100, it wont make a difference at all if you pay $25 or $100.

Answer 5

Actually it wouldn't make a difference to add new activity to you current statement as far as your credit score is concerned. Its just a good principle and sticking to it would probably be a wise thing. There is no real way to even tell on your report that you do that but I would give you a few points for diligence.

Answer 6

Paying off balances per se does nothing to you score. It's you BALANCE/ LIMIT ratio you need to be acutely aware of. FICO puts HEAVY emphsis on this ratio! If all of your REVOLVING debt limits are say $10,000 and you have TOTAL balances owed of $3,000 then your B/L ratio is 30% which is as high as you want to go before FICO starts to really lower your scores. So as long as you stay under 30% "UTILIZATION" your score will be largely unaffected. Hope this helps. Email me if you have any questions. Be glad to help.

Answer 7

It is always better to pay off a credit card early because then you can increase your standings, but be careful at the same time.

Answer 8

As long as your account is current, no late or missed payments and you're balance is about 30% of your credit limit or LESS it is good for your credit report. To see what does affect you score see http://creditwisdom.blogspot.com/2006/09/fico-breakdown-how-your-credit-score.html

Answer 9

Either way. Most people who extend credit just want to know if you make
your payments on time. Financially, your way may be better, because you
wont pay any interest on that $ 25.00 - only on the $ 100.00