How is your credit score related to credit utilization?
"1 - yes, it's fine to pay in full and it helps your score. 2 - see chart above, it's calculated based on what the bill shows each month.  3 - answered by chart. 1-19% utilization is ideal. 0% is actually worse than 41-60% Note: The above image was from Credit Karma. A slightly different image appears at the article The Relationship Between Your Credit Score and Credit Card Utilization Rate. I don't know how true this really is. Since writing this answer, I've seen offers of a true ""FICO score"" from multiple credit cards, and have tinkered with my utilization. I paid my active cards before the reporting date, and saw 845-850 once my utilization hit 0. Credit Karma still has me at 800." "Curious, why are you interested in building/improving your credit score? Is it better to use your card and pay off the bill completely every month? Yes. How is credit utiltization calculated?    Is it average utilization over the month, or total amount owed/credit_limit per month? It depends on how often your bank reports your balances to the reporting agencies. It can be daily, when your statement cycle closes, or some other interval. How does credit utilization affect your score?  Closest to zero without actually being zero is best. This translates to making some charges, even $1 so your statement shows a balance each statement that you pay off. This shows as active use. If you pay off your balance before the statement closes, then it can sometimes be reported as inactive/unused. Is too much a bad thing?  Yes. Is too little a bad thing? Depends. Being debt free has its advantages... but if your goal is to raise your credit score, then having a low utilization rate is a good metric. Less than 7% utilization seems to be the optimal level.  ""Last year we started using a number, not as a recommendation, but as a fact that most of the people with really high FICO scores have credit utilization rates that are 7 percent or lower,"" Watts said. Read more: http://www.bankrate.com/finance/credit-cards/how-to-bump-up-your-credit-score.aspx Remember that on-time payment is the most important factor. Second is how much you owe. Third is length of credit history. Maintain these factors in good standing and you will improve your score: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx"
"You should never close a credit card account unless it has an annual fee or you are overspending on it. Open lines of credit - even un-utilized ones - have a positive effect on your credit score. First of all, they increase your total credit which helps your score. Second of all, they are always ""paid on-time"" which is another benefit. Finally, they increase the length of your credit history. You can keep unused credit cards forever in your drawer. They are rarely closed due to inactivity and cost you nothing. However, if your card has an annual fee, you should close it. The potential loss to your credit score is unlikely to offset the annual fee." If you want to stay in the sub 30% range to avoid 'high utilization' on your card, make sure your credit is > 3.33x your usage.  For your numbers, a 2500 limit would probably keep you out of 'high utilization'. The primary reason to do this is to stay off your lender's 'high risk' list.  Due to the risk perceived by CCC's, accounts with greater than 30% utilization are reported as high utilization. Keep in mind that utilization does not have a history.  So you can drop your utilization a couple of billing cycles before you apply for a high cost item (e.g. car or house) and your score should bump up a bit. This chart above is taken from a Credit Karma snapshot I used in an article titled Too Little Debt? 30% of your score is based on utilization and this portion is scored as the chart indicates. A 61-100% utilization should really be avoided, but once paid, your score does bounce back, real time. Auto Insurance score is in no way related to your driving habits, instead it is based on your credit usage.  You are often punished for having more than one or two hard inquires in a year and they also frown upon having many lines of credit even though that helps your credit utilization. Yes. You can pay towards your credit card before the actual bill becomes due every month. However, your credit usage ratio does not get sent to credit reporting agencies exactly on the day of your bill; this data can be sent to the agencies any day of the month. So, keep your balance low at all times throughout the month, not just right before your statement closing date. FICO score tracks credit, not checking or savings. Unless there was a credit line attached, no impact at all. Please do not conflate number of credit cards with amount of debt. Consider two scenarios, The latter scenario yields much better credit scoring. Many recommendation sources suggest the following, Although your credit score seems very important, it is only important when you have financial interactions (such as applying for credit or services) where the other party makes decisions based upon the score. You should only obtain loans and credit when you want and it makes sense based upon your needs; choosing to live your life to serve credit scoring agencies may not be your happy place. Regardless of how it exactly impacts the credit score, the question is does it help improve your credit situation? If the score does go up, but it goes up slowly that was a lot of effort to retard credit score growth.  Learning to use a credit card wisely will help you become more financially mature. Start to use the card for a class of purchases: groceries, gas, restaurants. Pick one that won't overwhelm your finances if you lose track of the exact amount you have been charging. You can also use it to pay some utilities or other monthly expenses automatically. As you use the card more often, and you don't overuse it, the credit card company will generally raise your credit limit. This will then help you because that will drop your utilization ratio. Just repeat the process by adding another class of charges to you credit card usage. This expanded use of credit will in the long run help your score. The online systems allow you to see every day what your balance is, thus minimizing surprises.