Credit Myths #1 - Paying off your credit cards each month will improve your credit
Most consumer believe that paying off their card in full each month will somehow help their credit. This is simply not true. In fact for most consumers this will hurt your credit score. Remember that your 3 digit credit score is simply a number that lenders use to determine your credit worthiness. So if you are a lender and you give a consumer a credit card with a $15,000 limit do you want them to actually use that card or not. Of course you want them to use that card so you can make interest. Therefore your credit score is engineered to give you less points if you are not using a card.
You should always have some type of balance on any open revolving line of credit even if it’s just $5. However you should never owe more than 30% of your total limit on that revolving line if you want a high credit score. While lenders want to see you using credit they also want to see that you can manage your credit by not only making on time payments but also by not needing to use a high amount of that credit.