How do credit cards affect rating?

hammertime12

Hi,

My wife and I always pay off the full balance of our credit cards each month by direct debit from our bank account to avoid any interest charges. How does this affect our credit rating? I've heard that this doesn't help our credit rating because we're not actually building up any debt to pay off. Would it be better for us to only pay the minimum balance sometimes, for example on a new 0%-interest-for-the-first-year credit card, or does our score actually benefit just as much paying the full amount by the due date each month?

Thank you.

CLAPTON

paying the minimum is seen as some-one in financial distress unless its a 0% card when it makes sense and is generally expected.

using CC regularly and paying in full is excellent

don't complicate what is essentially simple

dylanuk

How much you pay off your credit card each month isn't recorded on your credit report - only whether or not you're making each required payment (e.g. OK or Default).

Whether or not the banks share information about how much you pay off is another matter.

Clearing your balance in full each month won't negatively effect your credit rating.

However, that doesn't mean your credit behaviour won't be treated differently by different lenders (e.g. having your account closed because you're not a profitable enough customer).

I don't think there is any reason enough for messing around with not paying off in full if you can though.

stephane_2

dylanuk wrote: »

How much you pay off your credit card each month isn't recorded on your credit report - only whether or not you're making each required payment (e.g. OK or Default).

Whether or not the banks share information about how much you pay off is another matter.

Clearing your balance in full each month won't negatively effect your credit rating.

However, that doesn't mean your credit behaviour won't be treated differently by different lenders (e.g. having your account closed because you're not a profitable enough customer).

I don't think there is any reason enough for messing around with not paying off in full if you can though.

Incorrect, some of my credit cards are providing to the CRA how much I pay each month

dylanuk

I stand corrected...

On Experian though I've only seen it showing green circles to show you've paid at least what is required by the agreement.

stephane_2

dylanuk wrote: »

I stand corrected...

On Experian though I've only seen it showing green circles to show you've paid at least what is required by the agreement.

Correct, until now it has been mostly Equifax

naijapower

I was told Banks secretly cherish those who dont clear their balances each month cos thats the way they can make money...i.e. customer accumulates interests etc.
So if you want your bank to love you (lol) dont clear your balance each month...NO CHANCE.

On a serious note, a friend of mine had a cap one about 7 years ago. He had his card for 7 months and always cleared his balance. When he called for a credit limit increase, he was told NO. Believe it or not, the reason given by the customer services operators was that the bank hadn't earn any money from him; hence no need to increase limit!!!

Mr.Mulla

hammertime12 wrote: »

Hi,

My wife and I always pay off the full balance of our credit cards each month by direct debit from our bank account to avoid any interest charges. How does this affect our credit rating? I've heard that this doesn't help our credit rating because we're not actually building up any debt to pay off. Would it be better for us to only pay the minimum balance sometimes, for example on a new 0%-interest-for-the-first-year credit card, or does our score actually benefit just as much paying the full amount by the due date each month?

Thank you.

You're actually doing nothing wrong. Paying off your credit card balance in full every month is strongly recommended.

Making the minimum repayment can help in the short-term if you have other financial priorities. In fact, if you are taking advantage of a 0% offer then it can make sense to make only the minimum payment. However, I do not recommend making the minimum repayment on a regular basis as this will cost you more and it will take you a long time, perhaps many years, to clear your balance.

So it is still better to pay it off in full.

hammertime12

Thank you all for your quick responses.
Here's why I asked.
My wife and I have a good credit rating here in the UK. But, I'm originally from the US, where I've had many credit cards that I always paid off in full every month and still do, yet they don't appear on my US credit report. The only ones that appear are a couple of anomalies where bills weren't forwarded properly to me over here in the UK and so payments were late (e.g. the renewal fee on a card I had no other charges on). These have negatively affected my credit rating in the US, even though I paid them off as soon as I realized the errors. Yet all my good credit activity, including the aforementioned credit cards paid in full every month for decades, and a student loan I paid off with regular, on-time payments, seems to have gone unnoticed and unrecorded. Can anyone offer any insight or help please?