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Question By
zcm44

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Will carrying a credit card balance of zero negatively affect my credit score?
Will carrying a balance of zero on all three of my credit cards negatively affect my credit score?

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Lenders Like to See Responsible Usage

Helpful to 12 out of 16 people

For the past couple years, my credit score had been steadily increasing because I would let my balance show up on my statement, but I wouldn't let the balance get higher than 9% of my total credit limit. Then, right after the statement was issued, I would pay the entire statement balance to avoid paying interest. Then I would use the card heavily throughout the month, but I would make multiple payments per month to avoid letting the balance get too high. 

In the past couple months, I tried a different strategy. I started paying the balance in full BEFORE the statement was issued, so my balance on my statement was zero dollars and my utilization was zero percent. While this did not hurt my score, my credit score stayed stagnant and was no longer increasing. 

So, while I was being responsible by paying my balances down to zero, this is still viewed by lenders as being inactive and irresponsible with credit. Lenders want to see that you're responsibly managing credit, which means that you're using your credit wisely and paying it responsibly. The only way lenders can see that you're using your credit is if you let your balance show up on your statement. This does not mean that you have to pay interest. All you have to do is pay the statement balance in full before your due date and voilà! No interest and your credit score will steadily increase as long as your balance is between 1% and 9%, although I've read that it's actually best to keep your utilization between 5% and 7% if you really want to see your credit score increase significantly.

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Most Helpful Response

Helpful to 31 out of 33 people

No, it won't negatively affect it.  However, if you keep a balance of 1-3% on at least one of the cards at all times your score will increase.

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Helpful to 27 out of 32 people

I'm trying NOT to keep a balance on my cards so there will be no interest charge.  However, having a regular monthly bill charged to a credit card (NetFlix works for me) and paid off every month is a great way to show "usage" and avoid paying interest.  This is a good mark on one's credit score.

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Carrying card balance=increased credit

Helpful to 3 out of 4 people

THANKS TO EVERYONE WHO RESPONDED TO THIS QUESTION.  Your advice and thoughts confirmed what I already believed: the lending / credit system is seriously bunged up. Seriously, though, I did find your responses VERY helpful.

I've decided that what will really be helpful is to win Power Ball for $441M.  I'd give EVERY FAMILY $1M to jump start the economy and have everyone not have to worry about holding their lives together.

So, when I'm Queen...

Reply by
majorflip83

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So there are 441 families in the US?

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Zepproxx

Helpful to 1 out of 1 people

Use your cards and run the balance up on each one and let that high balance report. Then you can pay them off to zero. Use each card for regular purchases thereafter and pay them off completely if you like. Bad cards like credit one or other high interest cards use every few months and pay off after reporting just to keep them open. Even a card with a yearly fee is worth it since it increases your available credit and low debt. I went from a 524 to a 721 in under a year doing this. I have two Capitol one, credit one, kohls, and bells outlet credit cards. I have a paid auto loan still showing late payments from 2011. Run them up, let them report and pay them off. Also this is how you will get credit line increases and qualify for better cards. Don't close any cards except when you ar sitting on excellent credit then get rid of high interest starter cards like credit one. It's very simple. I'll be a 750 middle of next year. 

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Becareful

Helpful to 8 out of 11 people

I have a mixture of balances, probably not the most healthy either. I had a $6 credit line on one card, I had a $600 on another, and $2000 on another card. I left them with no balance. Without consent or warning I had all 3 cards cancel my account for no usage when I went over a year without touching them. So carrying the balance alone was not bad but now that they canned those 3 cards my available credit has shrunk, my credit utilization has went up alot, and now my average card lifetime has went down as well. All of which has dropped my credit score about 40 points. So keeping the balance 0 is not bad, but I would make sure you buy something occassionally and then just pay it off so they dont close the account.

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Credit Card usage

Helpful to 1 out of 1 people

This is confusing. How can I payoff the statement balance and keep my balance @ 5%?

Reply by
Jwilliams1024

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Enter Your Reply I think what he meant was only use 5% of the credit limit each month and then when the bill comes pay it completely bc that shows usage but not over usage and it shows that you aren't pressed for credit.

Reply by
Larplover

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MrRiverside:

You have to know when your payment is due and when your balance is reported to the credit bureaus.  Typically, on my cards, reporting is done 2-3 days after payment is due.  If you carry a 0 balance and then charge just before reporting and then pay off just after reporting you'll incur no, or extremely low, interest. 

I have one card that if it's paid off in full there is no interest the next month if it is again paid off in full.

Reply by
Zepproxx

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Helpful to 0 out of 2 people

Don't over complicate it. It's no big deal. Run your cards up to the limit for regular purchases and pay the statement on the due date. Pay it off if you like. 0 or under 5% makes no difference in your score. You only use the cards after that if you need to or want to and enough to ke them open. Buy a tank of gas and pay it off on the due date or groceries every few months per card. They made a dollar of you and the card stays open. The available credit and low usage increase your credit score and going high balance and paying it off gets you credit line increases. It's easy. 

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Zero balances have their drawbacks

Helpful to 4 out of 5 people

$0 balance cards may be hurting your score.  Accounts with no activity, especially credit cards, will be counted as inactive after some period of time.  No I don't suggest you actually carry a balance to improve your score, but if you do need to show activity.  Put a few charges on the cards each month and pay it off fully each month when the bill comes.  The sweet spot seems to have about 5% card utilizaiton.

The function here is to show that you can use credit responsibly, the scoring model is all based off of what types of factors are observed for people who default on their obligations vs. those who always pay up.  Those statistics drive what behaviors result in score increases and which ones drop your score. It is all a guessing game, but some of it is very logical.

If you assigned credit scores, which of these things would you give points for or take them away for?

- Revolving credit utilization at 95%

- Debt to Income ratio of 75%

- Average credit line age of 11 years

- Missed or late payments in the last 10 years: 0

- Credit inquiries in the last 2 years: 22

Those all seem logical, but what about:

- Revolving credit utilization at 0%

- Number of accounts on history 10

These factors hurt your score, which may seem counter intuitive.

So, my suggestion, go charge up those cards a little bit...just pay them off every month.

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Credit card usage

Helpful to 3 out of 4 people

I use my chase credit card significantly every month (up to $10k or more, average $4k per month) but I pay the balance each month before finance charges accrue.  I don't seem to be getting  'credit' for that usage each month.  How can I make that happen?

Reply by
Larplover

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The failure is in not having the balance when the card reports it to the credit bureaus.  You have to have a balance when they report otherwise they will report that there is 0% utilized.  Call them and ask what day they report.  As i said below typically my cards report 2-3 days after payment.

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How I do it.

My score has gone up every month becuase I always keep a balance on it. I make sure that the amount that my card company reports to the bureaus is always less than the previous month. Knowing your statement date is key. Mine is on the 9th of every month and they usually report a few days after that. I also have a car loan and they usually report a few days after I pay my note. So that's another increase I would see. Knowing how to play the game helps a lot. And of course keep your utilization low. Keeping a 0 balance may work but reporting a 0 balance every month doesn't show any usage. But if you want to save money on interest then I guess that's how you do it. 

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