Paying Credit Cards Down to Zero, Not a Good Idea If You Want to Improve Your Scores

Keeping a small balance on your credit card and paying it on time monthly will help to increase your credit score.

A little information can be damaging. I have seen many folks who are attempting to improve their credit scores, pay credit cards down to zero and not see improvement to low scores.

If you don’t care about your credit scores and want to pay your cards down to zero, go for it, as it doesn’t matter to you. However, if you want to improve your scores, leave a SMALL balance, the credit bureaus love that and it will have a positive effect on your credit scores.

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twila February 05, 2013 at 06:20 PM
If you leave a balance you get charged interest. That is only good for CC company not you. Best to pay off balance every month.
RJ February 05, 2013 at 06:34 PM
I agree with Robert. Take anything Suze Orman says with a VERY large grain of salt. Her advice is often completely wrong. As for this article, it's partially true but very misleading. Having 0% utilization is actually looked upon somewhat negatively but that does NOT mean you have to carry a balance. Simply using your card and paying the balance every month is sufficient. In fact, that shows very responsible use of credit.
Terry Terzakis February 05, 2013 at 06:45 PM
I am a mortgage loan originator. Last month I pulled a new credit report for a borrower and her score dropped about 30 points from her previous report from just a couple months prior. The only change in this new report was that she paid off 4 credit cards that previously has small balances. I questioned this with the credit bureuas and they confirmed that going to a zero balance did indeed hurt her scores.
RJ February 05, 2013 at 07:11 PM
Having a zero balance on her credit report WILL hurt. BUT, you do NOT have to carry a balance to avoid having that 0% utilization. Typically your last statement balance is what will show on your credit report and count in your credit score. So if you just use your credit card to buy gas every month and your statement shows $200 - that's what will show on your credit report and will be very favorable in your credit score. It sounds like what happened is that she paid everything off and then didn't touch the cards. You then either re-pulled the credit after she got her new statements or you ran a rapid rescore. In that case, yes, she would have been hurt. In my experience, 1-20% utilization is considered an "A", 21-40% is considered a "B" etc. 0% is considered a "C." But you can EASILY get around the dreaded 0% utilization simply by using the card and paying off the balance every month.
Jason February 05, 2013 at 07:54 PM
Wrong again Joe, I can't believe anyone would give you any money.


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