Dear Liz: I pay off my credit card, which usually has charges around $1,500, in full every month. But when I looked at one of my credit reports, the account showed I had a balance every month. I called the credit card company and verified that they know I pay the balance every month, but the company representative said they were reporting the account correctly. How would the credit agencies know I pay it all off each month?
Answer: They don’t. All the credit bureaus know about your account is what the issuer tells them. The balance typically reported each month is the one that shows on your last statement, and there’s no indication whether you carry that balance or pay it off in full.
That’s why it’s so important to keep your total charges to 30% or less of your credit limit at all times. Using more of your limit can make you seem like a bigger financial risk, since maxing out cards is something that people do when they’re financially distraught and about to default.
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