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In This Time of Economic Crisis Does Paying Off Credit Cards Improve Credit Score

With the recent fall of the economy, the industry of banking is in turmoil and scared of what may happen. For them, there is a possibility that you are not capable in keeping up with your payments in your credit cards because the nation keeps on to work its way back on track in this economic meltdown. Of course, that is a reasonable concern for the banking industry especially the economy is slowing down, lost jobs increase, and an increase in the unemployment. However, the banks are by now stumbling from the mortgage-default crisis that triggered failures of most bank and forced relationship between fragile banks and less fragile banks.

To salvage their industry, credit card issuers do something to reverse the course. They have alternative ways to lend less money, particularly on accounts that they think risky like the consumers having high-unpaid balances and bad credit scores. Most credit card companies resort to aggressive methods like reducing the limits of credit card, closure of down accounts without giving warning, and sudden increas­e in interest rates. They do these in order to prolong their business and survive this economic meltdown. The bad news is that there is a big possibility that your credit score may drop, and sadly, these decrease in your credit score is not cause by the change you made in your financial behavior, but the reason is your credit card issuer changing the rules.

To avoid such things as well as to improve your credit score, your option is to pay off credit cards. Does paying off credit cards improve credit score? Yes, it does. Paying off credit cards is better than paying down installment loans. Credit cards are revolving account. These revolving debts have a set credit limit and let you to make acquisitions up to the set limit. Paying off those accumulated debt creates an available credit for you. If this happens, you can make more purchases again.

Most creditors and lenders will like to see a huge gap among the amount of credit you are currently using and your available limits of credit. Therefore, it can help your score if you keep the balances under 30% of the credit limit on every card.

As a credit card holder, you should be aware there are interest rates charged on all of your purchases using your credit card. Immediate payments of these debts are not possible for some people. Early payments in your credit cards prevent further interest from accumulating on your credit card debt. Credit card providers use differing interest rates to diverse transactions. It is a good strategy to make payments to the lowest interest bearing cards, which are near its limit. For a successful improvement of the credit score, early payments are necessary in order to prevent late fees. Late payments are the source for late fees.

Remember that the amount that you owe in your revolving debts as credit cards determine certain part of your credit score. Increase in your credit rating is possible when you paying off credit cards off.
About Author Tim H Lambert :

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Article Added on Tuesday, August 9, 2011
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