Posted on September 21, 2008 at 12:27 pm I heard that credit scores are based, in part, on the difference between your available credit and the amount of credit you are paying back.  The more you have unused, the better your score.With this in mind, it is better to pay a balance and cut up or lock away the card than it is to close the account!

Posted on September 21, 2008 at 9:51 pm Credit grantors don't like, at least according to published reports, to see a balance to limit ratio more than 30%. That means if you have a 10,000 dollar limit, you shouldn't have a balance greater than 3000 dollars. Just having a credit card with a zero balance doesn't mean much but it is better than closing it completely. Credit grantors are a wierd bunch and when they see you haven't used your credit they think things like you won't be able them because you don't have a lot of money to pay your debts. I know it sounds goofy but having been in the lending business and listening to the decision makers goofy is normal to these people.

Posted on October 23, 2008 at 4:53 am Actually - the bank I work for considers zero balance/high credit limit cards to be a liability and they REDUCE your credit score by several more points than what's on your FICO to calculate your borrowing capacity and rate/risk interest charges. So... maybe having a zero balance is a good idea. Always best to have no interest at the end of the month But reduce your credit limit to only a small amount otherwise the bank penalize you for it anyway

Posted on October 23, 2008 at 12:30 pm Working in finances, what I have learned is that creditors need to have a base of activity to judge your scores by. By closing accounts they do not have any activity to say: "oh, Diana has so many accounts all being paid timely and used wisely without getting to high in debt. She is a good candidate for lending." Also, a very logical explanation to higher balances- if a person is getting close to their limit without being able to pay it down it is saying that person might be having a hard time and may default on payments. This raises risk which brings down your score telling lenders you are not the best candidate for paying back debt. You also want to keep in mind that credit is judged by "computer systems" not poeple. There is no emotion invovled, only numbers, so this is why sometimes it ends up all goofy.

Posted on March 23, 2009 at 1:16 am A friend of mine uses her credit card just for the rewards and pays off the balance. I'm not sure how that affects her credit score. Perhaps it's beneficial to pay off debt before interest occurs. But, then again, there's no incentive for the credit card company.