Building a good credit history is the goal of many Florida residents and other consumers around the country. Most believe that an effective way to achieve good credit is to not incur any credit card debt by paying balances in full each month. Some people may go so far as to pay for any purchases immediately after they are made, thereby never even having a balance. This practice, however, may not result in an improvement to one’s credit score, according to financial experts.
Making payments in full after every transaction gives the appearance of a zero balance to the credit bureaus. Therefore, it appears as though someone has no credit activity. So, while a consumer may assume it’s a good practice, it is actually doing nothing to build a good credit history.
Financial analysts stress that using credit in a responsible manner is the best way to build credit. It is important to utilize different types of credit over time. With credit cards, a good practice is to use the card to pay for items or services, then pay the balance when the statement arrives. Expert suggest that a balance on a card should be no more than 10 percent of the card’s credit limit.
Credit scores are influenced by credit utilization ratios, or the balance divided by the credit limit. Having a ratio under 10 percent is idea, while one between 10 to 30 percent is acceptable. However, if the ratio exceeds 30 percent, one’s credit score may be negatively impacted.
Using credit cards wisely can be of great benefit. However, excessive credit card debt can be burdensome to consumers. For help in reducing or eliminating exorbitant card balances, it would be advantageous to seek the advice of a Florida bankruptcy lawyer. A trusted attorney can help clients develop a plan that can help move their financial situation in the right direction.
Source: cnbc.com, “You may be paying off your credit card bill wrong???here’s the best way“, Emmie Martin, Jan. 18, 2018