Whats Better for credit scores?

Question

I paid off my balance today and iam wondering if carrying a balance or paying off your balance is better for your credit score

Answer 1

It is better to have balances that do not exceed 50% of your total credit line for an item. Having low balances is probably more important than making payments on time. High balances are an indication of a potential problem. On-time payments alone can be a false indicator as a payment on one account can be made from another, such as paying one credit card using another, so a more reliable indicator is the total outstanding balances owed on all accounts.

Answer 2

Having purchased on credit, either card or major purchase like a car, will establish your credit rating. If you make payments on time and don't go delinquent you'll have a high score. Also, keep the number of credit cards you have to a minimum. The reason is that the rating agencies like TRW look at the possible amount of credit you have (not used) and consider that vs your income. If you have credit lines of $50,000 on several cards and an yearly income of say $40,000 your credit score will be lower even if you owe a small balance and pay on time. I know you didn't ask this but don't fall into the credit card trap. The interest rates are between 12 to 20 percent and it's easy to buy things you want but don't have the cash for. The next thing you know you're paying interest charges and the balance never comes down.

Answer 3

Paying it off is best for your credit score, no doubt about it. Carrying a balance is only good for the credit card in the sense that they know it's active but not good for you since you're paying interest on the balance. Best thing to do is to charge something small once a month and pay it off immediatly. This way the card will never fall into "inactive" status (for which the credit card may cancel your card for inactivity) and you will always maintain good credit score since you're always paying your balance off in time.

Answer 4

Paying off your balances is the BEST option to maintain a good credit score. Paying bills on time and not closing credit accounts a couple important points to keeping good credit. If you have multiple credit cards instead of closing them pay them off or transfer balances. Stick to one or two cards (the ones with the lowest financing rates). Also if you have high rates call the companies and try to get them to reduce the financing charges. Hope this helps.

Answer 5

Having no balance and is best. Also, an appropriate amount of open credit is the best IE: if you make $50,000 and have $5,000 in open credit lines (unused) that is helpful, but if you have $65,000 in open credit lines (unused) that will hurt you. One thing I learned is to keep one or two thousand in the bank for "surprises" so that I don't have to rely on credit cards anymore. It is hard to save that up sometimes, but once you have it it is a wonderful safety blanket. I am sure you already know about paying your bills on time. Lastly, you can get a free credit report annually from the 3 major credit reporting agencies. Do it! Make sure that they show you are paid off, no debt collectors, or really old accounts that you no longer use. If there are, correct them. Then your credit will be as good as possible!

Good luck!

Answer 6

Actually both are good credit practices. Carrying a balance and maintaining payments on time, shows good payment history and paying off a balance shows you are completing contract agreements and moving on down the Credit road. Just remember too much credit can work against you, so keep cards and notes at a level that you can handle. If you are on this track .....Great job!

Answer 7

In truth, paying off a balance can work for you or against you. If you buy and then instantly pay it off, you may not get good credit because creditors will think you as non-profit and if you don't pay it off, it can incur heavy interest and lower credit scores. Your best bet is to have a small balance (maxed out credit cards are really bad...) and make a couple of payments before paying it off. And of course, make sure payments are on time... yadi-yada...

Answer 8

If you use your card periodically and have a balance for a few months of the year, it is better for your score.

There are many variables that determine the actual score; Payment History, Usage < 50%, Amount of Credit vs Income, and other account status.

Example of good usage: Buy something for $100, pay it off in
2-3 months.

Answer 9

paying off balances is better for your credit score. This is because it lowers you Debt to Income ratio. Also, it show financial responsibilty. Plus, if it is a Credit Card you pay of it lowers your Revolving Credit, which inturn raises your credit score. But still make sure to pay everything on-time, and don't have your Credit pulled very often, that lowers your score as well

Answer 10

It's always better to pay of you debt's, but if you do have a balance, paying more than the minimum, and paying it off early , helps your score.. Late payments, non- payments, bankruptcies, and foreclosure's are what really hurt your score. Also , I heard the more credit you apply for brings down your score, doesn't make much sense, but if you ever get turned down on one of the applications that is a strike aganist you, and I am guessing the more you apply for , they might think you will end up with to much debt ..