Is it true that zero credit utilization is bad?

Question

I have a credit card solely for the purpose of establishing a credit history. I charge something small (maybe $30) often enough to keep the card active, and then I pay the bill in full.

I understood that this was the best way to use a credit card, but lately I've heard that having a low credit card balance is better for your credit score than having a zero balance. Is that true? And if it is true, what's the reasoning for it?

I can see how credit card companies might not want to extend credit to someone who won't owe them any interest. But other people looking at your credit score (car dealers, landlords, etc) should prefer to see that you're not in debt at all.

bdancer222 · Accepted Answer

If you don't use the card, it does nothing to build your credit.  Use the card on a regular basis and pay the statement balance in full every month.  That builds credit and avoids interest.

There is absolutely NO advantage to carrying balances.  it does nothing extra to build your credit.  Doesn't prove or show anyone anything.  In fact, credit card companies love people who use the card and pay the balance in full every month -- they make more profit off the merchant fees.

rpf5 · Answer

NO, that is false.  How you use your card is your business.  Don't let advertising dictate how you spend your money.  NOT having debt is a wonderful thing.    You are smarter then most.   A credit score is not the reason to risk debt or bust your budget.   A credit card can be a good thing,  you seem to understand that.   Keep doing what you do & forget a myth designed to make you spend money.

Sum · Answer

No - this will give you near the highest credit rating.  Pay the thing off each month - don't give these guys any money.  Doesn't matter to your credit rating.

And credit card companies don't like it much - they like you in debt - but they're not the ones controlling  your credit rating.

mafahiim · Answer

All people they that you have to show some balance at the statement before paying it. however, I know someone with excellent score and always was paying the balance before the statement, according to him, all his statements are having zero balance! Sorry but seems there is no answer for that. or banks are trying to hide that information on purpose!

Frank Barnwell · Answer

No Credit shows that you have not been Victimized by the System, and that you still have access to life sustaining Capital; just open a free checking account, get overdraft protection, and establish a $500.00 secured loan, pay back the $512.00,  repeat a few times, and Credit is established...0507/2015

Is it true that zero credit utilization is bad?

5 Answers