pay credit card balance in full

Q. I generally pay off my entire credit card balance in full each month but I have a friend who insist that it’s better for my credit score if I pay on time but not the entire balance (like pay off 95%) but always keep a balance. Is there any truth to this?


A. There is a lot of truth to your friend’s logic, but overall, I think you’re doing the right thing and I would encourage you to continue as you’ve been doing.


Your friend is correct in this sense: research shows that people who have the highest FICO scores actually do have some credit card debt showing on their credit reports.


Individuals who are so-called FICO high achievers have credit scores between 750 and 850 points. And while you might think that they have absolutely no credit card debt, that’s not the case. They typically have credit card usage rates of about 7%. In other words, they pay about 93% of their credit card balances in any given month. This is what your friend is suggesting. [continue reading…]