yeah i wonder this too, especially since a lot of times i'll make payments before the end of the month (for no reason in particular) so even my end monthly statements are real low, even if ive spent $1k total that month.

"Good credit" comes from a variety of factors; paying on time, paying a % of your outstanding or monthly balance, whether your balance goes up or down, whether you're looking for new credit, what kind of credit you already have, etc.

No, there is no need to carry a balance to build good credit; instead, you're demonstrating to companies that you NEED or USE credit and that you could be a source of income for them.

Any company that grants credit merely uses FICO as a base, mixing their criteria and business goals into the ring to make an individual credit decision; and in this odd way, any particular company's decision on whether you have "good credit" depends on the aggregate decisions by other companies, creating this aggregated notion of your credit-worthiness.

(btw, I've worked in the credit card industry and know just a wee bit about this...)

I asked the same question to the risk folks at American Express once.

It is the amount of your credit limit that you use. If you have 4 credit cards with $2000 limit each, you are scored against how much of the $8000 in credit you use per month. That's why having multiple credit cards, especially one that you keep dormant, helps you out.

I've heard canceling your credit cards can hurt your credit score, but I've never heard paying you balance has any ill effects.

Fun fact: According to a Frontline piece I saw a while back, folks who pay their balance every month are known as "deadbeats" in the credit card industry.

Good to know!

Does it hurt your credit to open a card and cancel it once you receive it in the mail? (You know when you can get 15% off for opening one at a store and you just can't help yourself?)