We just have a recent email from a reader.

I don’t have stellar credit. I have just paid off the balances on ALL [6] of my credit cards [Totaling $6733.00]. How far will this action go in improving my credit score and lowering my average interest rate, which is currently near 23-28%?

Mr Keith Wilson

Answer – Keith, the short answer is yes it will. Paying off your balance should improve your credit score should improve your credit score because you would have lowered your credit utilization ratio. This is the amount of credit you are using versus what credit is available to you.

Many experts recommend not using more than 30% of revolving credit (like credit card lines) available to you. So paying off your balance and planning to pay in full every month going forward should help tremendously.

There’s a caveat. If you have taken a home equity line of credit to pay off your credit card debt, then all you would have is to play a little musical chairs with the credit bureaus and that would not help much.

One thing I don’t understand is why are you bothered by your interest rate if you have paid off your balance? Surely you do not plan to carry a balance in future? I hope not.

But otherwise, congratulations on paying off your credit card and stick to PIF going forward.