A reader emailed us asking why her credit score isn’t improving even though she pays off her balances every month.

Paying off your credit card balances in full each month may not have a positive effect on your credit score.  In fact, the practice could actually hurt your score.

Credit card companies report your balances once a month.  If you are in the habit of maxing out your credit cards every month, then it will show on your report that your revolving credit is maxed if they report prior to the day that you pay the balances off.

Your available revolving credit makes up 30% of your FICO score, which is the industry standard for determining credit worthiness.  People with the highest credit scores maintain a low credit to debt ratio and you should too.  A good target is 20%, which means that you only owe 20% of the credit you have available to you.

The same reader asked if she should add more credit cards to make her available balance higher.

Adding a lot of credit at one time will have a negative effect on your score.  If you add new credit cards, you want to do it slowly.  A better alternative is to ask your existing credit card companies to raise your credit limits.

Also, keep in mind that each time you apply for new credit or you request a limit raise, your credit file will suffer a “hard inquiry”.  Hard inquiries stay on your credit report for two years and each one lowers your score.