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How do you build your credit with a credit card?
Is it done by completely paying off your balance to $ 0 each month?
Or is it done by paying the minimum every month?

the credit line on my credit card (visa) is 700 and i owe about 500-600. and i have been constantly paying the minimum every month, but everyone tells me that if i owe a lot of money and barely pay the minimum, i am making my credit go down. I dont understand how it works. Can anyone explain?

4 Thoughts on How does a credit card work?
  1. Reply
    December 21, 2012 at 4:18 pm

    you want debt to be zero so when only minimum comes in that means that your not paying off all of your debt therefore credit goes down not a lot.

  2. Reply
    Joseph R
    December 21, 2012 at 4:40 pm

    You built your credit by charging your credit card and paying off the balance by the end of the month. The company sees this and may increase your line of credit, but it depends on how well you paid off the balance.

    Don’t start paying off the bill by “paying off the minimum” per month. Why? B/c the interest starts as soon as the bill is due. You’ll be paying off the bill plus interest payments. This not only hurts your wallet but your credit information as well.

    When a customer, or client, doesn’t make the bills on time and fully paid, the company(s) will see this as a risk and will be hesitant to lend you money in the near future if you want a bank loan.
    These days due to the “credit crunch” banks are tighten their belts and may find people such as yourself as risks.

    The minimum you see on your bill is only the amount you will be paying strictly.

    Let’s say you forgot or didn’t pay the minimum in that one month. Your credit card company may give your several calls as to why you haven’t paid your bill. Or the company will send this info to the collection agency and they will HOUND you. Worst case scenario, you may have to sell some of your possessions.

    Your line of credit and trustworthiness will be questioned and this will stay w/ with you for a long time. You cannot repair it but you can alleviate it by paying off this bill.

    My advice is to pay your bill w/ the amount of money you have in your bank account that is enough to cover it and pay it off immediately.

  3. Reply
    December 21, 2012 at 5:05 pm

    Think of it from the credit companies stand point. You look better if you have had the card for a long period of time. That shows stability and responsibility. And the lower the balance the better, which shows your dedication to paying off your bills and not holding balances.
    Never let the balance on the card be more than 90% of the card limit as it drops your credit score. In other words never owe more than $ 630 on your card, and preferably owe zero if possible. Pay more than the minimum each month if possible, if you cant pay it off in full.

  4. Reply
    December 21, 2012 at 5:37 pm

    If you haven’t needed a credit card up until people have been telling you that you need one, don’t worry about it. You really don’t ‘need’ one. The only reason that I got my credit card (aside to help with my credit score!) was for emergencies-and that was at my family suggestion. I ended up applying for a card through my bank/federal credit union. They will be easier than any other place, especially if you have been with them for a while. Make sure you have NO annual fee. Aside from that, pick and choose.

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