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

Scott Wheeler February 5, 2013 at 03:41 am

Sorry but this is incorrect from my experiences, just had mine checked and while not having a CC balance I have a 790 score.
ANY debt is bad debt.

jane February 5, 2013 at 11:05 am

This is true. And remember, not all debt is treated equally. Good debt? Yup. Mortgage and student debt is not viewed the same at credit card debt. The reason having some CC balance, at least occasionally, will give creditors your history of debt accumulation and your ability to pay on time.

Financial Expert February 5, 2013 at 12:53 pm

Not true, this myth has been debunked time and time again. you don't need to leave a balance but you should use your card at least once every 6 months.
http://finance.yahoo.com/news/8-common-credit-myths-debunked.html

Financial Expert February 5, 2013 at 12:56 pm

credit score 810, no credit card balance! I use them each month, then pay them off.

Dottie Konarski February 5, 2013 at 03:00 pm

My understanding is that you do not cancel credit cards. If you have 5 cards, each with a $5,000 available credit and no debt, you have $25,000 available credit. Even if all your cards are paid up, if you cancel a card you now have 4 cards with a $5,000 available credit...translates to only $20,000 total available. According to Suze Orman, even though you have no credit card debt, your available credit is now $5,000 less and that is what is looked at. She also recommends paying the largest amount toward the card charging the highest interest rate. Makes sense. Her advice is to call the credit card companies and negotiate with them. Sometimes they will agree on a lower total due since they are happy to get at least SOMETHING toward the bill.

Robert Bracer February 5, 2013 at 04:56 pm

@Dottie, Suze Orman is a stooge, her advice is bad. Beware.

twila February 5, 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 5, 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 5, 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 5, 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 5, 2013 at 07:54 pm

Wrong again Joe, I can't believe anyone would give you any money.