BellaOnline Forums Money Abundance & Wealth Is it good to pay off credit cards?

According to the "experts" - paying off credit cards improves your credit score more than paying off other personal loans.

Do you agree? Have you had any personal experience with this?


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The rule of thumb that I've always heard is to pay off the highest interest loans (usually credit cards, of course) first. Less to do with credit rating and more to do with wasted money, which is what paying interest is. (OTOH, I love to receive interest!)

My dh and I have only used our credit cards as conveniences and for the cash-back bonuses, and pay them off in full, so have never carried credit card debt, for that very reason. We're allergic to paying interest. Wish our country was, too...

I agree completely - to maintain financial health you should pay from high to low interest, so that you're not wasting money. If you maintain good payments your credit history will increase naturally. I would never pay in money in interest to "pay my way" to a better credit rating, even if it did somehow make the credit rating increase more quickly! That seems like an odd risk to take. There are so many other better ways to build up a credit rating healthily that don't involve paying extra interest money deliberately

I also agree that we don't carry a balance here. I use my credit cards for all purchases - for the cash back bonuses. Then I pay them off each month. So I get a lot of cash in bonus because of the transactions, with no interest and no yearly fees. It's like a win-win situation I highly recommend it! Pretty much every single payment in the house including utilities goes through a card.

The only reason I don't pay utilities on my credit card is that they would charge me a "convenience fee" that is greater than the cost of a stamp and the cash-back bonus. Blah on them -- it is far more convenient for THEM if I do the work of entering the data, and they wish to charge me for it?

Lisa, one good reason to work on increasing your credit rating faster is if you are planning to buy a house within the year. The lower rate you will get on your mortgage will more than pay for that decision.

I have read a lot of books on this in the last year and a half, and talked to several credit counselors: we are thinking of getting a house in the next 12-18 months. Whatever it takes to get our scores into the 600s HAS to come first for us.

So it really depends on what your immediate (within the year) goal is.

But if you are not looking for a mortgage, then yes, that plan of paying off the highest rates first is usually the smartest plan.

I had a friend who was disappointed because he paid off his car loan expecting his credit score to go up. It didn't.

When he asked a loan officer why, they said paying off credit cards first will raise a credit score before other loans.

Jilly-I'm not sure I understand what you're saying. If you don't pay the highest rates first, or if you don't pay off your credit cards, will increase your credit rates?

I think paying any loan on time, and not getting too many credit cards makes a difference too. Sometimes paying a loan off too early doesn't show enough payment history so they don't like that. They want to know that you will pay every month for 30 years.

Actually, Doggiemom, you should not pay OFF revolving and installment credit if you want a good credit score. You should just pay them down. But not off. Lenders like to see a mix of responsible credit use (ie - like I said, both revolving and installment).

There is SO much to know on this topic and whole books are written about it that it would be really time consuming for me to get into it. If anyone really wants to explore this topic, there are some great books out there. Let me look around later to see what the one i would recommend right now is. I am really sleepy right now.

Denise, that is not really what I am talking about. But my only point is that people with fair-to-poor credit, who are looking to get a mortgage, have to do a few things that are strategic to increase their score, rather than what seems smarter in order to pay down debt.

Everyone's situation with credit is different. For example, I might have a high rate on a credit card, but having a revolving loan that you pay on time is a good thing in a lenders' eyes. And I might have a debt to a utility company who charges me no interest at all and never contacts me and probably forgot about me. Yet it's better to pay that off totally and NOT the high interest credit debt.

So it's not always as cut and dried as paying off the highest rates first in certain situations. It can be even counter-intuitive.

Of course if you are not looking for a house and aren't worried about your credit score, of course it makes sense to pay down highest interest debts first. So it's all about your own situation.

I really have to go to bed now.

I know we have a CF (child free) forum here. I'd like to start a CCF (credit card free) forum.

I personally do not believe in credit cards. Things can happen and it spirals out of control before you know it. AND - the credit card people know it and they do not care - only until it looks like you won't pay them back.

Experience: working in the industry.........

Just my humble opinion..........