It's usually not a good idea to carry balances on high interest credit cards

Paying Off Credit Card Bills Every Month Can Help Restore Credit

Whether you’ve filed bankruptcy, lost a home in foreclosure or just fallen behind on a few bills, you’re credit score has taken a big hit. It’s time to start fresh and make a comeback.

If you’re serious about rebuilding your credit, start thinking like a lender. Only after you have a basic understanding of how a lender, or even a landlord, looks at your credit, will you be able to build your credit back up to respectable levels.

One of the biggest factors in deciding whether to loan money to a borrower is debt to income ratio. Just like it sounds, your debt to income ratio is the amount of debt relative to your income. The basic theory behind the debt to income ratio is that, those already saddled with large debt loads, cannot take on anymore debt. They won’t be able to pay.

Keep this in mind when using your credit cards. Large outstanding balances on high interest credit cards are a big red flag for lenders and landlords. They see these debts as an obstacle in the way of their loan or rent being paid.

If you must use credit cards, try to pay down the balances to zero every month. Doing so will keep your debt to income ratio attractive, while simultaneously establishing a new credit history full of on time payments. It’s amazing how paying debts on time and not carrying large balances can improve your credit score and make you a more attractive candidate for a loan or apartment.

Still not convinced? Check out San Diego bankruptcy attorney, John Colwell’s post: minimum payments on my credit cards are OK, right?

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