Pay interest to “build credit?”
Another reader mail:
“i wanted to see if you can help me with some questions.
i recently heard from people that if you pay your balances off completely (mostly on credit cards) it doesnt build your credit. they say that in order to build credit you need to pay some type of interest. they tell me that paying off a credit card balance in 3 to 4 payments its the best way to build credit (paying more than the minimum of course). is this true?
thank you for your time and help,”
What exactly is “building credit”?
You get by far the best credit rating when you pay your credit cards in full every month.
Don’t listen to the creditors! Of course they want you to pay interest.
If you carry a balance you’ll only lower your credit scores due to a higher balance/limit ratio, one of the most important score factors.
If your definition of “building credit” is increasing limits, you may get faster increases if you carry balances. Every creditor has different policies, they change frequently and are sometimes rather absurd.
I have 4 Capital One cards, one with around 10% interest, another at 20%. They won’t lower the 20% interest rate - it’s their policy for that card. Does that make sense?
You might want to take advantage of special offers such as 0% balance transfers or checks, but watch for tiny print fees.
It is important that you do use each card at least once or twice a year. Some creditors close accounts that aren’t used or lower the limits.
Posted by Christine on 02/25/2005 at 08:07 PM
Credit - Collection - Economic News • (0) Comments • Permalink
