Credit Score How Credit Works

5 Common Credit Scoring Myths

2: Spread balances to increase credit score

Truth: Spreading out credit card balances over multiple credit cards can actually have a negative impact upon credit scores. Credit scoring models like FICO and VantageScore use a variety of factors to determine scores.

The second most important metric in credit scoring is debt load, or the amount and type of debt on your credit obligations.

The fewer accounts you have with a balance the better it is for your credit scores. Having a credit card with a zero balance is also very likely to have a positive impact upon your credit scores since cards with zero balances have a debt-to-limit ratio of 0%. The debt-to-limit ratio is a term used to describe the relationship between your credit card balances and your credit card limits.

When it comes to credit card debt the best strategy is to never revolve balances from month to month. However, if you are already in over your head in the credit card debt department then it is best to find an effective way to pay down your credit cards rather than spread out the balances.

If you cannot afford to pay off your credit cards, a consolidation loan might be worth considering, as long as you have the discipline not to charge your credit card balances back up once you have paid them off.

About the author

John Ulzheimer

17 Comments

  • I have paid loan for Firstcitizen s bank
    But shows up my credit report change off un paid
    Called the bank couple times they don’t even talk to me
    I have all paper works
    Shoul I go to court or what’s the best option
    It’s damaging my business terribly

  • If your comment is “awaiting moderation” it means they are getting ready to strip it from the website as being bad for business. Come back in a week, and you’ll see.
    The whole system from FICO to Credit Repair is designed to keep you ignorant, in debt, and paying fees and interest until your family goes into debt to bury you.
    Remember, figures don’t lie, but liars figure, It’s a huge industry and takes brains and good judgement to avoid. Good Luck.

    • Hi Phil,
      All comments are now being moderated to prevent spam, as we have been inundated with it lately. Comments will be approved within 24 hours during the business week.

      We appreciate your understanding and patience, and thanks as always for your thoughtful insight into our articles!

      • You are simply WRONG good sir…i paid my cc balances down to ZERO and within one week my ficos dropped from EXCELLENT/VERY GOOD/ GOOD ..down to POOR ! I called each bureau and they ALL SAID yes sir thats the way it works…gor instance in order fot me to rrgain my TRANSUNION 777 i need to be at least $5000.00 in debt..a 25% of my debts…Equifax 18% …EXPERIAN 9% !!!!

  • If you use your “rights” under Free Annual credit Report” or whatever the real law is called, you will get what the credit agencies call a “summery” about 3 pages long. This is the minimum they can do under the law because they hate that law, and can avoid any attempt at enforcement by providing it. If you sign up for one of the reporting agencies or FICO’s “good deal” programs for $45.00 or more a year, they will send you a detailed 35 page report of your entire credit history and offer you lost of other “opportunities” to raise your score. On the real report you will likely find some errors you can try to fix, and will probably be able to jump through enough hoops to do so. But your actual FICO and other scores will not go up. The only way to do this is to get into barely manageable debt, make the minimum payments on time and stay there for the rest of your life. Then you are a “good” consumer and probably a fine American. Now the whole system is making money on you. Welcome to the 800 club. It’s easy. And if you fall behind, pay the “credit repair” industry. They will help you get you the “right” level of debt, for an ongoing fee. Pay off your car, credit cards, house and store cards and you sir, are a deadbeat and will be treated accordingly. You’re practically a communist.

  • I had a student loan rep. said he would help eliminate the student loans for $1000.00. I told him that I would have to cut back on my grocery and gas money for going to doctors. He said do what ever it take to pay him to eliminate the loans. At the time my score was 640. I didn’t like his attitude, so he tried to call me ,email me. I just ignored him. One month later my sores dropped to 440. And I have been trying to bring my scores up since then.

  • I read this “Having a credit card with a zero balance is also very likely to have a positive impact upon your credit scores since cards with zero balances have a debt-to-limit ratio of 0%.”

    Here is what happened to me when I dropped my Credit Card balance to zero. Bank of America reported my account as inactive and that dropped my credit score around 6 to 10 points. As soon as I left a balance smaller than 10% on the card my score shot right back up to where it had been prior to paying off the card completely.

    Note, the bank took no time in issuing the “Account Inactive Message” to all 3 credit bureaus. 5 minutes after I transferred the funds to pay the card off to $0.00 I made a small charge of around $35.00 on the same card. I called one of the bureaus and was told it might be removed when the bank sent their next report to them, which it was. That was at the end of the monthly billing cycle around 30 days.

    Everyone most likely will not do things the same as Bank of America did. So I thought I would share my experience with paying off a credit card and the effect on my credit score. 🙂

    • Bank of America I find to be very unethical at many different levels. I paid off my card with them long ago and would never do business with them ever again.

  • I have had my credit scores and reports used against me for employment purposes at a high end employment agency, the position was for IT Administration / Support for a popular Armored Truck company.

    After deep discussion with my recruiter/ headhunter we couldn’t figure out what the hold up was, so we called them on it .. they said point blank I was a credit risk and with access to “armed individuals who were protecting the money ” I may become a liability given that i have a bankruptcy in my past.

    None of the recruiters I have worked with since then have denied , It can be a major factor .

    • I love accuracy and I may have made an error in my prior comment to you. Only certain agencies have to meet the yearly requirement of a free report,

      Not all of the Consumer Specialty Reporting Agencies are required by law to send you a free report every year. The link to the Government site will give you the information on this subject for each agency.

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