You may think you have to pay down all your credit cards to zero to get a good credit score. That's not true. In fact to show you know how to use credit wisely, it doesn't hurt to occasionally pay a card over time. Showing you know how to use credit wisely can actually help you get a better credit score.

If you don't buy on credit and pay everything with cash, you'll likely have a lower credit score because you have no credit history for the credit scoring agencies to use. This not only hurts your credit score, but it can also impact your insurance costs because insurance companies do use your credit score when determining rates. They believe people with a higher credit score file less claims and therefore are lower risk, so they get the best insurance rates as well as the best interest rate offers.

The ideal way to use credit is to use 10% to 20% of your available credit and pay all bills on time. That seems to get people the best credit scores. It shows the credit rating companies that you know how to use credit wisely and you know how to pay your bills on time.

Lita Epstein has written more than 20 books including the Complete Idiot's Guide to Improving Your Credit Score.