what is the best way to pay your credit cards to maximize your credit score?

Question

Is it better to pay off your credit card statement in full each month or should you leave a small balance each month, like $5? I've heard conflicting things. For example, paying each bill in full is better for your credit score versus leaving a $5 dollar balance. I've heard leaving a (small) balance is supposed to show that you know how to pay off a debt and help your credit score even more. I don't know what to believe. Your thoughts?

Answer 1

As long as you make any minimum payment, it reflects positively for your credit score because credit ratings take into account how many accounts in good standing you have. This means your payment history is good: no late payments, no missed payments or payments less than the minimum payment required.

High balances reflect negatively on your credit score. The more available credit you have (credit limit - outstanding), the better the score. Even if you pay your balance in full every month, your credit score will show a balance because there is a lag in between paying your card and reporting to the credit bureaus.

So, if you pay in full, it reduces your interest payments and also lowers your outstanding revolving balance. Both of these are good for you.

The only reason why some people mention that you should keep a small balance is because the credit lenders like that because they make interest off of you. That way they can send you more offers for more useless credit in the hopes of generating more interest fees from you.

Answer 2

i am a loan officer and I am positive that leaving any balance at all is no good. i consistently deal with all 3 credit agencies. Paying off your balance in full each month is best for your credit. Also, spreading balances out amongst say...2-3 credit cards is better than having all your debt on one card.

Answer 3

Pay your credit card in full every month. Why would you want to leave a balance and pay interest? The whole reason of having a good credit score is for lower interest rates. You don't want to pay interest just to get lower rates. That makes no sense! I have always paid my balance in full and my credit score is very high.

Answer 4

shop the two oldest significant credit taking part in cards that have not got annual expenditures. you could shop between the greater contemporary bills if it has greater useful pastime, greater shrink, or rewards. basically shop shop and gasoline value taking part in cards in case you have some specific purpose and actually use them. close something via making use of mail and request written affirmation that the account is closed and 0 stability. a lot of human beings are going to allow you already know to maintain all those bills open. yet having a stack of credit taking part in cards on your sock drawer is an extremely undesirable theory. you could take care of and computer screen all those bills against fraud and identity robbery. remaining all those greater desirable bills will initially decrease your score. besides the fact that, as long as you do no longer carry balances, your score will immediately rebound.

Answer 5

You should pay off your balance in full rather than leave a balance. 30% of your FICO score is based on how much of your available credit you've utilized. $0 used will be a smaller percentage than $5 used, and will result in a better FICO score.

For all the gory details of how FICO is calculated, see the June 30th posting at http://www.uthunk.com/ .

Answer 6

Definitely pay them all off. Its better for your credit, and better for your conscience.
Best way to accomplish this is by using a debt elimination calendar or to get a consolidation loan. Either way you're paying off the credit cards.