I was just wondering which is better in building good credit: paying the minimum payment (or slightly higher)every month on a credit card or paying off the balance every time? I know you avoid interest charges by paying the balance in full every month, but does one method give you a better credit rating than the other?
If you carry a balance that will improve your profit score at many banks which means they'll try harder to keep you by granting you higher limits, better rates etc. As far as your general credit score goes even if you pay off your balance they normally report what the balance was at the beginning of your statement so as long as you use it and aren't maxing it out there is really no difference in whether you are paying it off each month or not.
I've found paying off your balances, entices the card issuer to lower your apr in hopes that you will carry a balance. Most card companies make $$ off your annual fee $30-$40/year is more than the combined interest i pay in a whole year..
I've used a method of charging 80-90% of my credit line and paying 20-30% payments until 0 balance... then doing it again. I've quadrupled my credit lines in the last 12 months. I'll double it again (minimum) this year. The only drawback is you only apply for new credit when your lines are 20% utilized (total) or under. So, on a 1000 credit line, I'd charge 900 then make 3 consecutive 300 payments. Oh, they love this. When you apply for new credit, card companies like to see you've used your other cards, made huge payments, but only owe a little bit Now, when you're applying for a new card. I've purposefully made a good profitability score w/my creditors. Also, when my balance is low, I call the current creditors and negotiate terms. We have a ton of posts on this board about negotiating terms. Oh, I was told by a credit specialist that, even if you have a bad month and you're only paying close to your minimum, double it. If it's 15, pay 30. not much more money, but paying the minimum is a bad sign for their computers. Also, if you want to create "artificial" activity on your account w/out paying interest, you can always buy and return items. It's a bit timeconsuming, but all cards like some activity each month. Think about it from their perspective. They want to give you credit, they want you to use it, they want to make money off you you, they want to increase your credit lines so they can make more money off of you, but they want to feel secure that when they loan money to you they'll get it back. Nice tightrope walk. They want you to want credit not need it.
