To build credit, do you have to max out your card and pay it off or can you just spend a little and pay it off

Question

Will it build credit more if you max it out?

Answer 1

OK, this sure does get funny at times. I see everyone here taking wild jabs at the answer. Some are right but they don't even know why!

Start by going right to the source. Visit http://www.myfico.com

This is the site of the folks who developed the FICO scoring system. They have a rather large assortment of consumer education information that explains exactly how your score is put together, and what you should do to improve it.

Your goal is to establish a history of paying on time. Keep a small balance on your card at all times. Creditors who see a "0" balance all the time consider you a deadbeat. Go figure....

Over time, contact your credit card company and request an increase in your credit limit. Don't get crazy with this, you certainly don't need a $20,000 credit limit on a credit card. But a huge portion of your credit score is tied into how much credit you have, and how much you use (debt/credit ratio). As you continue to pay on time and use credit, they will be anxious to increase your limit.

What I recommend to people is look for a card with some sort of offer. I have one that pays "points" for every dollar you spend. The more you spend the more points you earn, which can be redeemed for prizes. I use this card for everything I normally pay cash for...utilities, groceries, gas, etc....then I pay it off. I leave about 5% on the card to maintain a balance.

My other 2 cards are used for larger purchases that I pay off over a few months time.

Do this, and you will see a marked improvement in your credit within a year.

Answer 2

To max out the card is not the answer. Just spend a little and pay that off over time.
I used to buy stuff on my card and pay it off at the end of the month, but I was told by an accountant that that's not the way to get good credit either. Weird. The best way is to owe a little, maybe up to $500 or $1000, and pay it down a little at a a time. But don't just pay the amount due. Always pay more than that. And don't be late with your payments!
Also, credit cards tend to screw you once you've been with them for a while. Watch out for extra "monthly charges" on your bills. When they start doing that, it's time to move your charges to a new card.

Answer 3

You've got a lot of fine answers, I just thought I'd add in a couple thoughts.

A good credit history is useful for buying things like houses and cars if you don't have the money to buy these things outright.

1. Use your credit card and go ahead and pay it off every month. I do and my score is great.
2. Have only a few cards, about 3 is enough. Use them all each month for small purchases.
3. Pay ALL your bills on time. If for some reason a payment is missed, call the company and explain. While my husband I moved, we missed some payments, but we just called and explained and it was fine.
4. If you want something and you don't have the money for it right away, it's alright to use a card but make sure you have a plan in place to pay it off. I bought a computer for myself that way. I paid it off over 3 months. A little bit of interest was worth having the computer for those months.

If you ever find youself over using your card(s), put them in a plastic container, fill with water and stuff in the freezer. That way, if you NEED them, you can get to them, but iyou wont just use it all the time.

Answer 4

There are a couple things you'll want to do.
First, don't max it out. Put like $ 25.00 a month on it, then pay it off immediately. The credit agencys don't care how much your spending what they care about is that your paying on time every month.
Second, very important make sure the card your using reports to the credit agencys on all activity not just if you don't pay. some cards like JC Pennys don't report you to the credit bureaus unless you default on the card by not paying on time.
Third, Don't get no more than two cards at the most. Having too many credit cards can hurt your credit to.

Answer 5

Spend a little and pay it off. Maxing it out regularly has a negative impact on your credit report. It you have to max it out once every now and again, not the end of the world, but I don't think it's a good plan to do it all the time.

Answer 6

Whether you max it out and pay it off, or you charge lightly and pay that off, the most important part is to PAY IT OFF. It's said that you would use no more than 30% of your available credit. I disagree, especially if I'm getting charged anywhere from 9 to 19% on that 30% I don't pay off. I'll break down how your score is comprised:

35% - punctuality of payment in the past (only includes payments later than 30 days past due)
30% - the amount of debt, expressed as the ratio of current revolving debt (credit card balances, etc.) to total available revolving credit (credit limits)
15% - length of credit history
10% - types of credit used (installment, revolving, consumer finance)
10% - recent search for credit and/or amount of credit obtained recently

The key is to pay on time and don't max out the card!

Answer 7

Credit is good when used wisely. When you use your credit card always think of how you are going to pay it off and can you pay it off when the bill arrives. Carrying a balance on your credit card is not a good idea as this can lead to many things including not being able to pay it off as well as compounded interest rate.

Answer 8

NEVER max out your card. Many credit card companies do not like when you have charged over 50% of your credit limit. I have paid my credit card in full every month and have a great credit score.

Answer 9

if you max it out and then pay all or most of it off, that will be the quickest way to build credit. Mainly because the cards will raise your limits very fast if they see you doing that...

The real answer if that you should put as much on your card as you can afford to pay off. So if you can put 1k on your cards and then pay it off every month you should do that. But dont put 1k on your card and the only pay 200 of it off.. that will lead to you paying alot of interest over time.

Answer 10

Creditors don't look at how much you've spent, or how little in your case. Instead, they look to see that you have a balance, and when it was paid off (by due date or not). Your best bet is to spend little and keep paying it off. Your credit should remain in tact, and the less often that the annual percentage rate kicks in, the better.