You want to keep it as low as possible. However, using your credit card for everyday spending can cause your credit utilization ratio to go up, particularly if you don't pay off the balance in full each month. A higher credit utilization ratio will lower your credit score.
If you decide to use your credit card for everyday purchases, it's crucial you make sure to only use it for things you would otherwise be comfortable buying with your debit card. Make sure you can pay off what you're putting on the card on time each month, especially if you want to avoid making interest payments.
In fact, if you don't use your credit card often enough, your account could be closed. Though ideal credit card usage varies by issuer, it's recommended that you use your card at least once every three to six months.
few small risks, it's generally harmless.” How frequent payments affect your account interest: Making frequent payments can be a way to reduce the amount of interest you owe on your account balance. If you pay off your balance in full each month, you won't owe any interest.
The 15/3 credit card payment hack is a credit optimization strategy that involves making two credit card payments per month. You make one payment 15 days before your statement date and a second one three days before it (hence the name).
Once is enough. In fact, once, most of the time, is ideal. “If you're paying with every single transaction, it may not even show that you're even using credit and it's reporting to the credit bureau as a zero balance all the time,” Greg McBride, chief financial analyst at Bankrate.com, tells CNBC Make It.
It's Best to Pay Your Credit Card Balance in Full Each Month
Leaving a balance will not help your credit scores—it will just cost you money in the form of interest. Carrying a high balance on your credit cards has a negative impact on scores because it increases your credit utilization ratio.
You should try to use your credit card at least once every three months to keep the account open and active. This frequency also ensures your card issuer will continue to send updates to the credit bureaus.
If you haven't used a card for a long period, it generally will not hurt your credit score. However, if a lender notices your inactivity and decides to close the account, it can cause your score to slip.
Help build your credit score
There's no need to buy large items or go into credit card debt – charging inexpensive items you have to buy anyway works just fine. Your credit card balance doesn't even need to be high for you to build credit.
The most important factor in your credit scores is payment history. To build credit with your credit card, make at least your minimum payment on time every month. If you miss your bill's due date, the card issuer may charge you a fee and you could lose any introductory or promotional interest rates on your account.
So, the most common outcome of letting your card go unused is that the card issuer simply cancels your unused credit card and closes the account. There is no hard-and-fast rule as to how long a credit card company will allow you to keep your unused credit card on ice.
Your credit card balance is higher than usual
If you had unexpected expenses and you put them on a credit card or cards, your credit score could drop. That's because a major factor in credit scoring is “credit utilization,” or how much of your credit limit you're using.
Depending on where you're starting from, It can take several years or more to build an 800 credit score. You need to have a few years of only positive payment history and a good mix of credit accounts showing you have experience managing different types of credit cards and loans.
You should use your secured credit card at least once per month in order to build credit as quickly as possible. You will build credit even if you don't use the card, yet making at least one purchase every month can accelerate the process, as long as it doesn't lead to missed due dates.
FICO credit scores, the industry standard for sizing up credit risk, range from 300 to a perfect 850—with 670 to 739 labeled “good,” 740-799 “very good” and 800 to 850 “exceptional.” A 700 score places you right in the middle of the good range, but still slightly below the average credit score of 711.
To avoid paying interest and late fees, you'll need to pay your bill by the due date. But if you want to improve your credit score, the best time to make a payment is probably before your statement closing date, whenever your debt-to-credit ratio begins to climb too high.
The most important action to take is to pay off your full balance each month, no matter how many payments it takes to get there. Weekly payments could strengthen your credit, but consider that as an added bonus.
By making multiple credit card payments, it becomes easier to budget for larger payments. If you simply split your minimum payment in two and pay it twice a month, it won't have a big impact on your balance. But if you make the minimum payment twice a month, you will pay down your debt much more quickly.
Paying your credit card off weekly can provide a hack to keep your utilization rate low, which in turn improves your credit score. Some banks use your statement balance and payment history to report to the credit bureaus.
A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.