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You never have to carry a balance

By Philip Tirone

According to a survey from the financial website NerdWallet, nearly half of Americans (41 percent) think that a person has to carry a small balance on his or her credit cards from month to month in order to have a great credit score.

But this is untrue. Your credit score can be terrific even if you pay your credit card bills in full each and every month.

That said, there are a few rules you do need to keep in mind when it comes to making the most of your credit cards, though.

Rule #1: Use your credit cards.

Though you do not need to carry a balance to have great credit, you do need to use your credit cards regularly. If you stop using them, they become inactive, which means they are not giving the credit bureaus any information about you.

Inactive credit cards do not do anything to help your credit score, but if you use your credit cards—and pay your bills on time—your credit score will start to increase, as long as you follow the other rules.

You can keep your cards active and avoid paying interest by paying your balance in full each month. We have plenty of clients with terrific credit scores who use this strategy.

Rule #2: Keep your balance below 30 percent of your limit.

Though having a $0 balance on your credit card will not hurt your credit score, having a high balance will. The best credit scores are given to people who have a low balance, month round. A low balance is calculated as anything below 30 percent of your limit. If your limit is $1,000, for instance, your balance should never be above $300.

If your balance starts climbing above 30 percent of your limit, credit-scoring bureaus start worrying that you are strapped for cash and turning to credit cards to relieve your financial troubles, and they will lower your credit score.

Rule #3: Pay your credit card bills on time.

Of course, most people know this, but the most important thing you can do to help improve your credit score is to pay your credit card bills on time each and every month. If you have the finances to do so, it’s a good idea to pay them in full each month: And contrary to popular belief, having a $0 balance will never hurt your credit score.