Is it better to pay in full each month or keep a small balance to build credit? My interest rate is 14.90%.?
I am 18 and I just got approved for my first credit card-an orchard bank secured card. I have seen many post saying that keeping a balance will help you build more credit and I have seen post saying paying the total balance in full is better. I intend to pay in full each month but will paying in full help build my credit?
The Answer : I wish people would occasionally do some research.Start by taking a trip over to http://ww.myfico.com and look through their consumer information pages. It explains exactly how your score is calculated and what you need to do to improve it.The truth is if you have a small balance it will have a slightly better effect on your credit. But to get the most out of it, you have to understand the timing of your payments and closely monitor your balance.Being a new credit card user, I would prefer you didn't mess with this "game" just yet. At this point what you want to do is pay off your balance in full. Obviously, you don't want to charge more then you can afford to pay at the end of the month. But here are lots of things that you have to buy anyway (gas, food, utilities)....so use your card to pay those items off. Then pay off the balance! Using the card frequently will improve your credit. Paying it off in full each month will not cost you anything in finance charges or interest. After about 6 months contact Orchard and request a credit limit increase. As time goes by you may even request a lower interest rate. As time goes by keep an eye out for better credit card deals. It is recommended that you have 2-3 credit cards. As you establish a good credit history these companies will actually seek you out with great offers. By gradually increasing your credit limits and getting a few more lines of credit, you will improve your score far more then playing the "balance" game.
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