The Forbes Advisor editorial team is independent and objective. Make a habit of paying off your credit card balance each month (ideally before the statement closing date when your card issuer updates the account with the three credit bureaus) and keeping credit utilization rate below 30%. Credit utilization is a major factor that contributes to 30% of your FICO® Score and plays an important role in your VantageScore credit score too. The choice to revolve a balance will also create credit card debt that you have to deal with at a later date.Ĭredit scoring models like FICO and VantageScore also consider the credit card balance that appears on your credit report when calculating your credit score and how much of your total credit limit you are using (aka your credit utilization ratio). On the other hand, if you revolve an outstanding balance over to the next month, high-cost interest charges will kick in (unless you’re taking advantage of a 0% APR credit card offer). Therefore, paying off your credit balances is more important than ever. The average credit card interest rate has been climbing this year thanks to recent rate hikes from the Federal Reserve. So, when you pay off any charges you make during a billing cycle by your due date, you can avoid paying interest on most credit cards. If you know you can’t afford to cover the cost of a purchase by the time your next credit card bill will be due, it’s probably better to avoid putting that charge on your account in the first place. The best practice you can follow when using a credit card is to pay off your entire statement balance each billing period.

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