So I've heard from some people that for your FIRST credit card ever, its better to leave a (small) outstanding balance on your card every month (i.e. not pay off the whole thing every month) because it will show that you can handle an outstanding balance or something and help build your credit. (I've heard to do this for about the first year, and then its better to pay it off in full every month) Is this true?
2007-09-19 04:23:20 · 8 answers · asked by Anonymous in Business & Finance ➔ Credit
Hmm so i have two financial advisors/managers telling me different things, and different opinions all around lol maybe it just doesnt really matter as long as everything is on time and i dont get in over my head? such a tricky subject apparently...
2007-09-19 04:42:38 · update #1
Hello, First Time Credit Card User.
Your credit worthiness is what the lenders (credit card, mortgage) can view in order to decide whether or not to extend to you credit.
In terms of building good credit, history and consistency play a large part in improving your score. If you can pay at least the minimum amount (hopefully the entire amount) as payments are due then your credit score will improve over time.
Leaving an outstanding balance does nothing to improve your credit worthiness but large outstanding balances can actually hurt your credit worthiness because creditors would see you as a higher risk customer if you have other obligations.
What "some people" may have been referring to is that some credit card companies are beginning to charge small "administration fees" to customers who pay off their bills in full every month. This is strictly a business decision because a large part of their revenues come from interest on outstanding balances. If you see this though, I would encourage you to look elsewhere for a good credit card company. Just as you are building a relationship with you, you are building a relationship with them. If your credit card company sees you as a nuisance simply because you want to pay off your bills in full each month, it's best to move on.
Also, since you are just beginning to establish your credit, get into the habit of checking your credit report at least once a year. You are allowed by law to do this through the three major consumer credit reporting agencies.
Visit: http://www.annualcreditreport.com
From that site, you'll want your credit report (free), not necessarily the credit score (obtained for a small fee).
2007-09-19 07:10:38 · answer #1 · answered by Sin™ 6 · 0⤊ 0⤋
No!!! That advice is totally bogus. Well, mostly. It is a very good idea to show that you are capable of maintaining a monthly balance, however there are so many other opportunities to do that. Once you finance yourself a car, there is no better way (besides a mortgage) to show you are able to handle monthly payments. For now, ALWAYS pay it off in full! Trust me, I did this myself and I secured a mortgage when i was 21 because of my good credit.
Do you have a cell phone? Autopay your cell phone with your credit card and take the money that you would have payed your cell bill with and put that towards the monthly balance of the card. You aren't paying anything more, and you are paying the credit card off in full every month as if it was your cell bill, so you are building good credit.
Do not let yourself fall into the credit card hole. One credit card is good to use to pay off at the end of every month, but don't let is accrue over time.
Besides, why would you want to pay the interest every month of that outstanding balance?
2007-09-19 04:34:47 · answer #2 · answered by Lunar Sarah 4 · 1⤊ 0⤋
Yea, there are a lot of people who think you need to carry a balance to get a good credit rating. But they are WRONG. Credit cards do not report exactly how much you pay. They just report that you pay on time or not.
Pay the credit card off in full every month. Most important is to always pay on time. No sense paying interest.
2007-09-19 04:28:08 · answer #3 · answered by bdancer222 7 · 1⤊ 0⤋
Pay off your card in full!!! Credit cards have high interest rates a lot of times....why pay the credit card company interest if you can pay in full. There is no need to have a small outstanding balance. Before long, it will add up. Everyone in my family pays off their cards in full and they all have great credit.
You also build up credit though loans.....so if you have a car loan or student loans....that shows in your credit history too. Never pay interest to a credit card company unless you absolutely have to.
2007-09-19 04:48:19 · answer #4 · answered by Megz 6 · 0⤊ 0⤋
Leave a balance of some sort on your card, not a huge balance, but something. Yes, credit cards just post whether you paid or not but its if its on time or not. The point of building credit is showing a pay history. Yeah I am sure that you can pay it all off at once but they like to see that you are responsible for paying month to month a set amount of money. Please trust me on this, I am a financial adivsor and this is what I deal with every day.
2007-09-19 04:32:34 · answer #5 · answered by Blueyez 2 · 0⤊ 2⤋
As far as score building, it makes no difference.
I would use it for everyday things never exceed 30% of your credit limit in any given month and pay in full before the due date.
I have done this for the last two years with two cards and raised my score over 150-points.
2007-09-19 04:31:45 · answer #6 · answered by ? 7 · 1⤊ 0⤋
presently many women human beings do no longer take the final call of their considerable different so in case you reside on the same address then being an approved consumer on a variety of of of his debts will in all probability help you. including you will no longer do a factor to or for his credit, you would be the only one to income from it.
2016-11-05 21:00:39 · answer #7 · answered by ? 3 · 0⤊ 0⤋
hmm, i never did that, always paid off everything on time. my credit score is very good.
2007-09-19 04:31:17 · answer #8 · answered by Anonymous · 1⤊ 0⤋