I've always been confused about this so I figured I'd ask the experts. Is it better to nearly max out a credit card each month and pay off it's balance every month, or just not use it at all? Let's say I have a card with a $10,000 limit and fill it up with $5,000 worth of expenses each month but pay the full statement balance each month, does that build my credit better than just not using it or barely using it? When I pull my credit, I see pretty high balances on my cards because I've been using them for all expenses and paying them off each month. I'm wondering if the fact that my cards always show a balance is hurting my credit score. Technically they are getting paid off, but my balance is never zero because I'm using them constantly. So just to sum it up again, use my card and pay it off each month or don't use it at all? Which is better? Thanks! Edit: I just wanted to add that I have the option of just paying with my debit account card if it ends up being better.
Maxing out your cards each month and paying them off in full will hurt your credit score more than just holding the cards and never using them or just using them from time to time to make small purchases. Your score will benefit by using less than 30% of your total available credit on each card. If possible, your credit utilization should be under 10%. So, get approved for more credit cards if you need to, increase your credit limits, or make purchases using your debit card if that's a better option. Keep your credit utilization low, pay off your balances each month, use your debit card if you need to, and your credit score will improve over time.
The best way to do it is to pay most of the balance before the statement date. Leave a small balance so it's obvious you use the card, but the utilization is low. Then you can pay the rest when you get the statement.
Awesome advice guys, sounds good to me! From now on I'll keep my utilization around 10%, instead of the 50-75% I've been doing, and we'll see what happens! Thanks again.
