Should I pay my credit cards off completely, or keep a small balance?
February 21, 2013 6:54 PM Subscribe
Due to a family thing, I have received a one-time windfall, and I would like to pay off my credit cards, improve my credit, and buy a new car (getting a loan for most of it). I just want to know if it's good to keep a small balance or pay them off completely.
posted by marble to Work & Money (20 answers total) 1 user marked this as a favorite
I have checked all three credit reports via the free annualcreditreport.com thing, and there are no blemishes or mistakes on my reports, so nothing I need to dispute there. I had terrible credit in the past, then had a lull where I used no credit for a long time, then about three years ago I started rebuilding it. I have five credit cards now, with about $6700 in total balances. This amounts to something like 93% utilization. I found out my credit score, and it's 633, which I know is not good.
My question is: As far as improving my credit goes, is it better to leave a small balance on my credit cards (maybe $300 or so?) or pay them off completely?
I plan to get a car loan in the neighborhood of $10,000-$12,000 after I pay down / off my cards and my credit improves. I have enough for a good down payment, but not enough to buy the car outright without a loan. If I do keep a small balance, it would be on my credit union card which has the best interest rate of all of my cards. I will be using the credit union for the car loan as well.