There is a common misconception that carrying a balance on your credit card can benefit your credit scores, but that is not true.

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Ideally, you should do everything you can to pay off your credit card in full by the due date every month.

Factors That Influence Your Credit Scores

The most important factor in the FICO algorithm is your payment history. Paying your cards on time will have the greatest impact on your credit score. What people don’t realize is the Second most important factor is your Utilization Rate, or balance-to-limit ratio.

For example, say you have two credit cards with both a $500 credit limit, your maximum credit limit would be $1000.00. If you spend $500 between the two cards in any variation your utilization rate is 50%.

Pay Your Credit Card Balances In Full

If you are working on establishing credit nothing will have a greater impact on your score than paying on time and keeping your credit limits low. If you cannot pay the balance in full, keep the balance as low as possible. You should never carry a balance of more than 25% of your credit limit on any once card or in total. The lower your balances, the better it will be for your credit scores.

If you are wondering, then what and how do you manage your credit cards, I will explain further. Making small purchases and then paying them off right away will keep the card active and keep your balance well below your credit limit. This demonstrates that you consistently manage debt well and can help increase your credit scores.

I hope this information has helped.

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