It's better to pay off your credit card than to keep a balance. It's best to pay a credit card balance in full because credit card companies charge interest when you don't pay your bill in full every month.
According to the Consumer Financial Protection Bureau (CFPB), experts recommend keeping your credit utilization below 30% of your total available credit. If a high utilization rate is hurting your scores, you may see your scores increase once a lower balance or higher credit limit is reported.
If you don't need your stimulus check to afford your basic necessities, putting it toward your debt will save you from the high interest that accrues when you carry a balance month to month. Paying off debt also lowers your credit utilization rate, which helps boost your credit score.
Credit utilization — the portion of your credit limits that you are currently using — is a significant factor in credit scores. It is one reason your credit score could drop a little after you pay off debt, particularly if you close the account.
“Having a zero balance helps to lower your overall utilization rate; however, if you leave a card with a zero balance for too long, the issuer may close your account, which would negatively affect your score by reducing your average age of accounts.”
Having accounts open with a credit card company will not hurt your credit score, but having zero balances will not prove to lenders that you are creditworthy and will repay a loan. Lenders want to make sure you repay, and that you will also pay interest.
Unless your balance is always zero, your credit report will probably show balance higher than what you're currently carrying. Fortunately, carrying a balance won't hurt your credit score as long as the balance you do have isn't too high (above 30% of the credit limit).
To build good credit and stay out of debt, you should always aim to pay off your credit card bill in full every month. If you want to be really on top of your game, it might seem logical to pay off your balance more often, so your card is never in the red. But hold off.
Despite what you may have heard through the grapevine, it's always better to pay off your entire balance — or credit debt — immediately. Not only will this save you time and money, but it'll reflect well on your credit score.
For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.
While long-term credit card debt is generally a bad idea, carrying the occasional balance on your credit card shouldn't cause too much damage to your finances.
Making more than one payment each month on your credit cards won't help increase your credit score. But, the results of making more than one payment might.
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.
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.
Make all of your payments on time. Keep the amounts you owe as low as possible. Keep your credit accounts active so that you build a long (and positive) credit history. Apply for multiple types of credit accounts (such as credit cards, car loans and mortgages) over time.
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).
The reality is that carrying a balance could actually hurt your credit scores. For example, carrying too high a balance could result in a high credit utilization rate — the percentage of your total credit limit that you're currently using — which in turn may lower your scores.
Using your credit cards regularly while maintaining low balances (or zero balances) tends to promote higher credit scores. Outstanding balances on credit cards can even hurt your credit score, and this effect is most drastic once balances exceed about 30% of a card's borrowing limit.