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JDiGorio

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Is it better to pay off a credit card every month or make payments toward the balance every month?
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It is almost always better to pay off your credit card completely if you have the financial means to do so. From a financial perspective, unless you have a special rate on your credit card balance (say 3.00% or lower), you are generally better off paying the monthly balance in full. An exception could be to have cash for emergencies. In today’s economic environment, having cash can be very useful should you lose your job or run into another financial emergency.

From an optimal credit score perspective, paying interest on a balance doesn’t help your score. Using your credit card once every few months is enough to build a history of responsible credit use and payment.

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The best way to build your credit is multi-faceted.  Do not apply for credit cards just because you get a flyer in the mail........avoid pre-approved offers.  When you make payments on your existing accounts, pay as much as you can afford above and beyond the minimal amount required by the company billing you and never pay just the interest accrued on the card for the month.  Do not pay so much that it "takes food off your table", but always pay a bit more than required and ALWAYS pay your bills earlier than required.  Make monthly payments for a minimum of six months to establish a credit record and then pay off the balance as soon as possible.  Do not let your cards sit idle for too long or you run the risk of having your card and account closed by the lender due to in-activity which in some cases causes potential lenders to view your credit worthiness as less than desireable.  Remember, they are in business to make money in the form of interest on your account and if you do not use the account, you are worthless to them as a source of income.  Use each card at least one time every six months or so and then pay off the card in full if you have pre-established the account as stated above.  Do not shop around for items to charge without seriously considering a purchase.  Any time you give your social security number to a potential lender, you have an inquiry added to your credit report.  If you do buy from a lender, the inquiry will be deleted when an account is activated.  If an account is not activated, the inquiry will be on your credit report for two years and too many inquires are just as bad as not paying your existing accounts on time or defaulting on your bills.  It is important for you to know that the credit retention centers (equifax, experian and trans-union) were created by doctors, attorneys and bankers for the sole purpose of protecting THIER interests and not yours.  Do not give them the chance to ruin your credit history which can effect your entire life for the rest of your life.  Bankruptsy will stay on your history for a minimum of seven years.  Bad debts will usually stay on your report for a minimum of three years IF IT IS NOT RE-ENTERED by the creditor.  The creditor has the right to re-enter the negative information for as many years as they want and some of them will 'dog' you for decades!  If you go into collections, contact the collection bureau and get a promise from them IN WRITING stating if you pay your account correctly and in a timely manner as required by them that they will remove all records and references to them from your credit report.  BE ADVISED:  credit correction companies charging hundreds and sometimes even thousands of dollars are not doing anything you can not do for yourself for free.  Every time credit is refused to you, you have the right to see a copy of the credit report from the agency contacted.  READ THE BACK OF THE REPORT for instructions on correcting and improving your report.......IT IS FREE and the same process used by credit correction agencies.  NEVER use a company that offers to reduce your payments or combine your payments into one affordable monthly payment.  To creditors, this is a red flag saying you cannot manage your credit or money.

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Maintain small balances

Helpful to 136 out of 142 people

I'm in the process of buying a home. Three people (mortgage broker, real estate agent, and atty helping repair credit issues) told me that maintaining a small balance on my credit cards would help my score. Keep your balances under 25% of your available credit; just carrying a balance of 5% is good. The fact that you have credit available helps your score. The fact that you are able to responsibly use that avaiable credit (pay your bill on time!) will be even better for your score. I always payed my credit cards in full each month ...before I even got the bill to avoid paying interest. I followed the advice I got and my score increased.

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It is almost always better to pay off your credit card completely if you have the financial means to do so. From a financial perspective, unless you have a special rate on your credit card balance (say 3.00% or lower), you are generally better off paying the monthly balance in full. An exception could be to have cash for emergencies. In today’s economic environment, having cash can be very useful should you lose your job or run into another financial emergency.

From an optimal credit score perspective, paying interest on a balance doesn’t help your score. Using your credit card once every few months is enough to build a history of responsible credit use and payment.

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Helpful to 46 out of 47 people

I pay my monthly bills with credit cards using only 10% to 20% of each card, than every month on the 1st. I pay off the cards 100%  which gives me a "A" Grade on "using" and  100% grade for paying on time. this way my home bills get paid (as they do every mounth) . I pay Cash to eat out or go to the movies. The trichk is if you use OVER 21% of you credit card you get a LOWER grade in you report card..  You want to show that you are a responible person with your money.

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sneakzorz, you are correct that a 0% utilization of your credit cards will lower your score. BUT you are incorrect in the way you think this is calculated. As Lesismore46 stated, The balance reported to the credit agency is based on the amount that is on your bill when they mail it out (or post it online etc). They report it to the credit agency at this time, before you have even had a chance to pay it. As you know, If you pay it in full before the due date, no interest is accured. But as far as the credit reporting agency is concerned, this counts as utilization of your credit card.

 So, suppose your limit is 1000, you charge 750, and pay it off as soon as you get your bill. This will count as 75% utilization as far as the credit reporting agency is concerned, even though no interest was accrued and you paid it off immediately.

The best way to improve your utilization score in my understanding, is to use 1%-9% of your limit and PIF(pay in full) immediately when you get the bill. You don't have to carry a balance month to month and you don't ever have to pay any interest.

Sorry so long. I hope this helps clear some things up.

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payoff

Helpful to 63 out of 67 people

paying off your card every month is better. 1. your score will increase and 2. you avoid getting an interest fee

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Helpful to 13 out of 14 people

"It's better to cut them up and pay the minimum until you have an emergency fund set up. At least 1000$. This is insurance so you don't have to use credit at all. Ideally you want to have 6 months of income saved up for emergencies. Then use the snow ball method to pay off cards. And live debt free.

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Helpful to 92 out of 94 people

I believe the poster stating that credit card companies, or any debtor for that manner, can continue to report debts "for decades". This is called re-aging a debt, and I believe it's illegal. For example, you have a 7 year old debt which is due to drop off your credit report in a couple of months. The collection agency or credit card company sells your debt to someone else, effectively starting that debt fresh. This cannot be done. You can dispute this and it must be taken off your credit report. Please also be aware that each state has statute of limitations on debt collections for various debts. This does not mean that the debt will drop off your record in less than 7 or 10 years, depending on the item, it just means that you can only be pursued for that debt for a certain period of time. For example, here in Florida, the statute of limitations on medical debts and credit card debt collection is 4 years. After that 4 years, you can longer be pursued to pay that debt, but it will stay on your report. Several years ago, I got a medical bill for something that had occured about 6 or 7 years prior, that I had never received before. Since it was past the 4 year statute of limitations, I sent the bill back with a note stating that the statute of limitations had expired for that debt, that I was unaware of it, and that it should have been covered by insurance. I never heard another word, and it was never reported on my credit report. I have several old credit card debts, 5-6 years old, that have been charged of, because they can no longer be collected. They still show on my credit report, and yes, they hurt my score, but I can no longer be pursued for payment.

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Helpful to 73 out of 79 people

I would pay down on the balance before the due date and leave around 7 to 10% on it and then pay the remaining balance after the statement closing date. If you pay off your balance before the statement closing date and your statement reads o balance, you will not earn any points. Utilization is a main key to earning points every month. Your statement closing date is approximately 5 days after your due date. Example: If your statement due date is on the 27th of the end of the month then your closing date will be around the 2nd of each month. I suggest paying the remaning balance off after your closing date and leaving 7 to 10% to reflect on your statement in order to earn more/higher points. The less % you report the more points you earn.

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Helpful to 68 out of 71 people

Watch for your closing dates on your credit cards.  If you want to take advantage of the "utilization" then allow the credit card company to record your balance, it happens usually a couple days before closing date, then pay in full.  You will never pay interest, and you will get the use of the utilization record.  If that is your goal.  My utilization is sitting at 0% 90% of the time and it has never affected my score.  There is no need to ever pay interest or leave a balance on a credit card.  Ever. 

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