Does paying off your credit card balance in full every month still build credit?
I am an 18 year old first year college student and I have a student visa through my bank. I have a 700 dollar limit and I think a 17% interest rate.
Every month I charge like 40 or 50 dollars on it (food, gas, whatever) never any more. I leave it alone until I receive my bill in the mail, and then I go online and pay it off in full each month.
My question is, does this still build good credit? My dad said something about leaving a balance on a credit card, and how that builds more credit or something, but I wasn't sure if that was right.
Yes it does help your credit score in a few ways.
You're keeping credit active. 10% of your score
You're paying on time. 35% of your score
You're keeping your spending low. Credit to debt ratio is at 5%.
This is awesome for your score! It's 30% of your score.
If you maxed the card out every month and paid it in full every month you might see a drop in score. This is because your credit to debt ratio would be at 100%. Paying it off will not matter because it's kept at that high ratio every month.
Keep up the good work.
yes it does never leave a balanceby golferwhoworks - 5 years ago
Absolutely. You do NOT need to (and shouldn't) carry balances.by src50 - 5 years ago
Yes this is the best way to build payment history and score quickly.
Never carry a balance unless it's unavoidable, if you do never let it be over 30% of your credit limit and always pay on time.
Source(s)by Leroy W - 5 years ago
You want to pay off your balance and this you have done. That 17% interest rate seems high for such devotion. May I also suggest that you call the credit card company and negotiate a lower interest rate? Something that could happen (to let you know how good you are doing) is getting a letter that they have raised your credit limit. Do not let that throw you. Keep with the plan to spend only what you can pay back.by Kay - 5 years ago
Yes, it builds the best type of credit history; "pays as agreed". The credit report does not say if you paid the entire balance or just a portion, it just says if you paid according to your credit card agreement. (at least the minimum and on time), and the largest amount loaned.
If you pay in full every month, you don't pay interest, either.
Carrying a balance doesn't build more credit than paying in full. It just means you waste money on interest.
Keep using that card and paying in full every month. That's the best way to build a good payment history, avoid interest, and stay out of debt.
As long as you pay the balance monthly, don't worry about the interest rate. Just write it down when you are expecting the statement, if you do not receive it for some reason, just pay it on line without the statement.
Source(s)by stan c - 5 years ago