Alright, I want you to take everything you THINK you know about credit cards and throw it away. Seriously unless I gave you the advice erase it from your mind for just a minute, let’s consider things from a new perspective.

Okay, now we can get talking.

You hear all the time you need to pay your card off right away, use it like a debit card, don’t carry a balance. Blah blah blah. Listen to me, I know that’s BS. You NEED to have a statement showing you are using your card and payments are being made to some extent for credit burrows to really see you are using your revolving credit. And for credit card companies to see and understand you should be given higher limits. It’s a win win when you think about it.

So Tim from Montana wants to get a credit card but he is scared he will effect his credit by carrying a balance and paying interest. So we are going to explain to Tim why that isn’t the case.

He goes to his favorite store, Cabella’s and wants to purchase some camping materials with his credit card, Susie from down the road says “Hey Tim, make sure you pay that off when you get home, don’t want to carry a balance or pay interest, that’s bad.”

But honestly, that defeats the whole purpose of utilizing a credit card to help build your score. Remember 35% of your credit score comes from your revolving credit (or accounts that don’t have an end date like a car loan does.)

So instead Tim goes home with his new camping gear and he waits until he sees a statement generated on his card, then he decides to pay the balance in full so he doesn’t have to worry about it. This is the proper way to do it if you want to show those credit companies you mean business with your cards and credit.

You will often see people talking about two big Myths when it comes to carrying a balance on your card.

Myth 1: Use your card, pay off the balance and this way you won’t carry any interest. But if you see my example above you know why that isn’t good. Credit burrows need to see your statements and that you do USE your card.

Myth 2: You NEED to maintain a balance to get a high credit score. I know you’re probably like didn’t you just say that above. No, I said you need to wait until the statement is generated to pay it, but then feel free to pay it in full. The biggest thing you want to pay attention to is if you’re looking to get funding use 30% or less of your limit, and if you aren’t 50% or more. Check out this video to see why. Or read our blog post on it.

Look, I have plenty more tips and tricks in my book 3 Paths of Lending. You can get your copy here – Drop an emoji in the comments  if you already have it. 

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