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Does it help credit?*

Does it help my credit score if I use up my credit card, then pay the full balance before it's due or is it better for FICO scoring if I just always keep a small $20 balance on my card at all times and just almost never use it?

Answers:

1) Paying in full is best if you don't you will not get a grace period on purchases. Credit scores don't get better from paying interest.

2) The best way is use the card. To pay it off right away shows you didn't need the money to borrow. To keep a high balance shows risk of non payment. Credit card companies are in the business of making money. How can they do that if they get back exactly what you borrowed. They want the interest, so you let them get a little to keep them happy and your credit score will go up.

3) It will always be best to use your credit card regularly, but only charge small amounts on it. Pay the balance off completely before it's due. The score is based on your balance to credit limit ratio, total balances, and payment history. The score does not factor how much interest you pay - that is not part of your credit report - and the banks do not generate your score, so it's not about keeping them happy. Keep your money and don't pay interest, but keep your score high by paying all credit cards in full and on time.

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