I got this fantastic question via my Facebook this week. If you have a question for me feel free to ask it via Facebook or Twitter @johnulzheimer.
Q: John, I enjoy your articles. Keep it rolling! I have a question about credit cards. I try very hard to pay my credit card bill in full each month so I don’t have to pay interest. I also know it helps my credit score to have a $0 balance on my credit card. Whenever I pull my credit reports there’s a balance on my credit card. That’s not right. The balance is always zero! How can I correct this?
A: First off, you’re doing great to pay off your credit card balances in full each month. Future borrowers care about your credit scores not your ability to carry credit card debt. In fact, there is nothing on your credit report that indicates your past balances or whether or not you have ever carried a debt on a credit card. It just shows your balance from your last month’s statement, that’s it. Pay your balance in full each month and you’ll be fine. And, you won’t ever pay interest. However, even if you do pay in full each month it’s very unlikely that you’ll have a utilization percentage of 0%. Credit reports show the balance from your previous statement and it’s rare that your balance is really ever $0, right?
When your check clears you’ve already used the card again so you already have a new balance that’s greater than $0. If you REALLY want to end up with a $0 balance on your credit report then you have to pay your balance in full by the statement closing date, not by the due date. If you pay it in full by the statement closing date then your statement will have a $0 balance, and that’s what will be reflected on your credit reports. Another way to end up with a $0 balance on a credit report is to not use your card for one full cycle after you’ve paid it off. That way your credit card issuer will report the $0 balance because there are no charges during the month.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.