Paying your CC balances each month is a GREAT thing to do. And in the future, FICO models will look closely at whether you have done that. Until very recently, however, the credit bureaus gave them no way to tell if you were doing that.
So instead, for the last 40 years or so, FICO has looked at something else. That thing is called "reported utilization." I'll give you an example of how that works below with a made up credit profile.
Suppose Bob has three credit cards: with the following credit limits:
Card 1. CL = $1000
Card 2. CL = $4000
Card 3. CL = $5000
Bob's combined or "total" CL is $10,000.
Suppose Bob uses all three cards each month. When the statement for each card prints, there will be an amount owed on it. This will be the CC balance at that moment. The CC issuer will then report that amount to the three credit bureaus.
Suppose that his statements tend to print each month in the first week or so. Suppose this month they printed with a total amount of $3200. Because Bob is like you he always pays his bills in full. But that $3200 has already been reported to the three credit bureaus. 3200 / 10000 = 32%. That's how much of Bob's total credit limit he is using.
Believe it or not, FICO considers 32% too much and it penalizes you for having a CC utilization that high. It actually wants you to have a much lower utilization: below 9%.
But the key thing is, you could have a 52% reported utilization each month (which hurts your score) or a 5% each month (which is great for your score) but still in both cases still be paying your statements in full after you get them. While paying in full is an AMAZINGLY good habit to have, FICO can't (right now) see it. All it can see is your reported utilization.
The trick is learning how to keep your reported utilization very low but still use your cards as much as you want. Any number of people here can explain to you further how to do that.
