Clearing credit cards

VultureDodger

Can I ask a quick question, please? I've seen a lot of advice saying 'in order to build your credit, use your credit cards and clear the balance each month'. Is this in order to avoid paying interest, or is the act of clearing them completely each month the reason that your credit score goes up?
Thanks

Nebulous2

VultureDodger wrote: »

Can I ask a quick question, please? I've seen a lot of advice saying 'in order to build your credit, use your credit cards and clear the balance each month'. Is this in order to avoid paying interest, or is the act of clearing them completely each month the reason that your credit score goes up?
Thanks

It's a bit of both. Companies offer credit to people they believe will repay it. So a steady income, stable address and a good financial history all help.

It increases your chance of convincing them if you have a solid history of actually repaying what you have borrowed. So for a credit card paying it off is better than letting it build towards the maximum. If you are going to pay it off then it makes sense to do it every month and save paying interest.

In practice I'm not sure that is much better than making a big purchase and repaying it over 2-3 months, which is kind of the purpose of credit cards, but it is cheaper.

Thrugelmir

Operating a single credit card in a normal manner is perfectly adequate. Doesn't build your score as such. Merely demonstrates that you can manage having a credit facility responsibly.