Should you pay your credit card off every month?

Originally Posted by GailC

And if you have many cards, pay off in full the one with the highest interest rate first.
Then apply those funds to the next highest one etc.....

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DH and I did that over the past couple years. Since last May we have been credit card debt free and only have one card for online purchases and things. Actually this month we may have a small balance left over due to a car repair and me still not working, but I consider that an emergency so I'm only beating myself a little bit for it. Usually when we make a purchase online, DH puts it in our banking register as an actual purchase, so when the bill does come, we've already reserved the money for it.

that helps immensley to pay it off every month - the longer you take to pay off outstanding debts, the more money you finish up paying for borrowing the money in the first place. Interest is a horrible thing

It definately helps it.

Originally Posted by MoochNNoodles

I've heard that you look like a bigger risk if you have several open cards with nothing on them. That was from something related to buying a home. They said something to the effect of because lets say you get the house, then you use your credit cards to buy furniture and what not, and suddenly your finances are changed. Does that make sense?

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If your available balances exceed your income then yes you can be a higher risk. I was recommended to have 3 major credit cards than 1 and many store cards.

You can also ask your CC to cap your available balance so you don't exceed with all the increases.

Here is the difference: If you want to IMPROVE your credit score or FICO, then you do NOT want to pay off your credit cards in full every month.

I never said that doing so is a bad thing, only that it makes you a bigger credit risk: the more available credit you have, the more likely (so they say) that you may be to actually incur that much debt at some point in your life.

Paying off your credit card bills in full every month is a GOOD thing if you want to stay debt-free. That is THE only real benefit to doing so. It's a pretty big benefit, sure, but doing so does not help improve your credit rating in any fashion, nor does it lower your current score.

I have a very high FICO along with a lot of debt: lenders LOVE me. I pay on time, I carry balances and therefore they make money on my interest payments.

Before I learned the realities of credit scoring, I closed a bunch of accounts that I had paid off, thinking that this was a good thing to do - my credit score PLUMMETED as a result.

You need to decide what is more important to you: a high FICO and great credit score or being debt-free. You honestly can't have both in today's sub-prime lending world.

Originally Posted by GingersMom

Here is the difference: If you want to IMPROVE your credit score or FICO, then you do NOT want to pay off your credit cards in full every month.

I never said that doing so is a bad thing, only that it makes you a bigger credit risk: the more available credit you have, the more likely (so they say) that you may be to actually incur that much debt at some point in your life.

Paying off your credit card bills in full every month is a GOOD thing if you want to stay debt-free. That is THE only real benefit to doing so. It's a pretty big benefit, sure, but doing so does not help improve your credit rating in any fashion, nor does it lower your current score.

I have a very high FICO along with a lot of debt: lenders LOVE me. I pay on time, I carry balances and therefore they make money on my interest payments.

Before I learned the realities of credit scoring, I closed a bunch of accounts that I had paid off, thinking that this was a good thing to do - my credit score PLUMMETED as a result.

You need to decide what is more important to you: a high FICO and great credit score or being debt-free. You honestly can't have both in today's sub-prime lending world.

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Good for you.

I actually had the opposite experience. I am sure there were other factors for it too.

I think the moral of this story is that credit lenders do whatever the heck they want

Well, because I know the following things about you Suzie I'll give you this advice: YES! PAY THEM!

You are: 1. A home owner.
2. Have a full time job.
3. Live in a dual income home.

The credit card companies are counting on you not to pay it off, and then will tempt you with a refinance of your mortgage to get the balance off of you.

The best thing in the world for you to do is to pay them in full. You aren't actively seeking a new home and therefor don't need an extremely high FICO.

It's best to pay it off every single month so that you don't have a running balance and you aren't paying interest charges!

When I use my card I am going to be carrying a balance. That's because I only use it for a big necessary expense that I couldn't afford otherwise like a $1,000 vet bill a while back. Because of the way I use it there are long periods of time when I don't use it and I don't have a balance. I don't know a lot about how credit scores work but I do know that my score falls in the excellent range. I know people who use theirs a lot every month and then pay it off every month but I know I would get myself in trouble if I would try that.

I'm not sure if you guys helped or confused me! Many different points of view, which actually is nice. Jerry and I luckily can pay off any credit card debt we build over a month, but it just got me to wondering this morning is all if I'm doing us a favor by always paying the full amount every month.

Originally Posted by kittylover4ever

I'm not sure if you guys helped or confused me!

Many different points of view, which actually is nice. Jerry and I luckily can pay off any credit card debt we build over a month, but it just got me to wondering this morning is all if I'm doing us a favor by always paying the full amount every month.

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Easy ... get your credit report ...

Originally Posted by GingersMom

Here is the difference: If you want to IMPROVE your credit score or FICO, then you do NOT want to pay off your credit cards in full every month.

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I disagree with that statement. Whether you pay off the entire debt or not per month, the key is to pay the minimum payment before the due date. That's what gives you your credit history. When you make any late payments, that's what effects your FICO score.

Your FICO score is based on 5 things:
1)Record of paying your bills on time: 35%

2)Total Balance on your credit cards
and other loans compared to your
total credit limit: 30%

3)Length of credit history: 15%

4)New accounts and recent apps: 10%

5)Mix of credit cards and loands: 10%

I always paid off my balances every month (up until the last couple of months) and I was always well above the "Best" mark. Now I just make sure that a regular monthly payment gets made and my FICO has remain the same.

Originally Posted by lunasmom

I disagree with that statement. Whether you pay off the entire debt or not per month, the key is to pay the minimum payment before the due date. That's what gives you your credit history. When you make any late payments, that's what effects your FICO score.

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Please point out to me where exactly I suggested that people make late payments or skip payments entirely?

There are a number of different factors that are combined to give you a FICO. Total number of open credit lines, years lines held, highest credit amount, yes, any late payment history, debt to income, I could go on and on.

I rephrase to clarify: If you are aiming to improve your FICO, then it is a smart idea to keep a balance on at least one revolving account while making at least the minimum payments on time, every month.

Originally Posted by GingersMom

Please point out to me where exactly I suggested that people make late payments or skip payments entirely?

There are a number of different factors that are combined to give you a FICO. Total number of open credit lines, years lines held, highest credit amount, yes, any late payment history, debt to income, I could go on and on.

I rephrase to clarify: If you are aiming to improve your FICO, then it is a smart idea to keep a balance on at least one revolving account while making at least the minimum payments on time, every month.

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I did not read your statement as skipping payments. I read it simply as you said it: keep a revolving balance to improve your FICO score. I was simply saying that paying either the minimum payments or the entire amount owed on time improves your FICO score. Making those payments on time contribute to 35% of your credit score.

What I was disagreeing with was keeping the revolving balance. As I outlined in my statement 30% of your FICO score is based on your total balance of credit and loans compared to the total credit limit. So if you have a credit limit of $10,000 and keep a balance of $5,000, that 50% debt-to-credit ratio effects your FICO score in a negative way and lowers it. The lower your balance to available credit, the more it raises your credit score. So by paying off the balance on time each month you keep your FICO score higher by decreasing the debt-to-credit ratio.

Besides, with interest rates that credit cards charge why would you want to keep a constant balance on one of your CCs? Unless that's the part I'm misunderstanding and you're saying to charge at least one thing per month and pay if off on the next bill ? I read your statement to mean that you rack up $1,000 on one of your credit cards and just make the minimum payments...then if it gets too low (i.e. you only have $50 left to pay) you go back out and rack up another $1,000. If that's the case, that's just wasting your money because of the amount of interest rates your paying.

Originally Posted by Crazyforinfo

Good for you.

I actually had the opposite experience. I am sure there were other factors for it too.

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The same here. I've been paying off my credit card every month for the last 30 years and my credit rating is in the 600's somewhere - about 15 points away from a perfect score. Now I do have a mortgage balance, but that is my only outstanding debt.

Originally Posted by Momofmany

The same here. I've been paying off my credit card every month for the last 30 years and my credit rating is in the 600's somewhere - about 15 points away from a perfect score. Now I do have a mortgage balance, but that is my only outstanding debt.

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Please correct me if I am mistaken, but isn't the perfect score 800?

Originally Posted by pipersjo

Please correct me if I am mistaken, but isn't the perfect score 800?

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I don't think there really is a perfect score. Mine is in the 800's but I know some with 900's.

Originally Posted by Crazyforinfo

I don't think there really is a perfect score. Mine is in the 800's but I know some with 900's.

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Wow! I didn't know that!