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This makes sense. Your credit utilization has a high impact on your score. What they’re looking for is the ratio of Credit used over credit available. Ideally you want to keep it under 30%. In your case you’re dividing by zero so it’s impossible to have a good ratio.
If you’re looking to raise your score, just getting a credit card and not even using it will improve your score by increasing your divisor above zero, but some banks may close the account if it goes unused. If you do use it pay it off ASAP. There is a terrible misconception out there that you need to carry a balance on a card and pay interest to raise your score. THAT’S JUST NOT TRUE. Don’t ever carry a balance. It doesn’t ever help your score and can only hurt it if your ratio gets too high.
All true points. A pot of our parents grew up terrified of using credit or using it too much for everything and going into debt.
Credit is a tool to use. All the credit score does is show how good you are at using that tool. Can you use it responsibly, without abusing it out going into debt? They can't score you on how well you use credit if you don't use it at all.
Slight caveat, while credit is a valuable tool to use, studies have shown that credit cards absolutely increase spending, regardless of if it's paid off each month.
For this reason I encourage people looking to build credit but afraid of debt to use credit cards only for non-flexible spending. Gas, utilities, subscriptions, etc.
Yep - if it's an expense I have to pay monthly anyway and might as well use one card for my expenses then pay it off every month and reap the rewards points/cash back.