I am 24 years old and have been trying to keep a close eye on my credit. I know that I should be using about 20% of my credit limit. However, I now have about 40% used. I have plenty of money and I have no problem paying it off now.
But should I pay it off?
Will it affect my credit score or have negative affects in any way?
How bad would maxing out my credit card once a year affect my score is a related discussion. You shouldn't be using 20%, but rather keep the monthly statement below 20%. If the credit lines add to $5000, charging gas and paying in full each month will help your score (obviously, I assume you don't pay more than $1000/mo for gas). Letting the balance go unpaid month to month means you are paying interest. Probably 18% or more. This is bad.
By reducing your debt you will increase your borrowing capability which will only increase your credit score. But before you start worrying about your credit score as JoeTaxpayer says I would first stop paying 18+% to the bank.
The effect on your credit score would be a positive one.
If you have plenty of money now then pay off the balance each month. If you are very disciplined and can pay off the balance each month you could stop using your debit card to make daily purchases and use your credit card instead. That way you can keep your money in an interest bearing account all month and pay the bill in full when it comes due.
