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Credit card utilization and your credit score

Dec 05, 2014

Hanq is right. Your score will be higher if there is a small balance owed (ideally as little as possible, definately under 10%) at the statement closing date as opposed to a zero balance owed. You then pay off the small balance owed by the due date and you are not charged any interest. There is no benefit whatsoever to your credit score of carrying a balance/paying interest. Also note that paying the entire balance off on time every month is not enough to get the highest score possible. The utilization rate (most cards report this as the amount you owed on your statement closing date) is one of the most important aspects of your credit report.

Their thinking in a nutshell is that even if you pay your bill on time every month the fact that you use a high percentage of your available credit means that if you fall under unfortunate circumstances you will be less well prepared to deal with it than someone who typically uses only a small percentage of their available credit.