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Does Carrying a Credit Card Balance Help My Credit Scores?

Written by John Ulzheimer

How you choose to manage your credit cards has a considerable influence over your credit scores. When credit cards are managed properly they have a very positive credit score impact. However, when credit cards are abused they can cause damage to your score. One of the myths that can potentially trip up a consumer is whether carrying credit card balances helps or hurts credit scores.

How Credit Card Balances Impact Credit Scores

Credit card debt has the ability to negatively impact credit scores even if the monthly payment is made on time, all the time. But an antiquated credit reporting system only allows credit card issuers to send updates to the credit bureaus once a month. That update is sent shortly after your monthly statement is generated. So, the balance on your credit reports is always you prior month’s balance.

Credit scoring models, like FICO and VantageScore, pay close attention to the balances on your credit card. In FICO’s scoring systems the category that considers debt related metrics is worth some 30% of the points in your score. In VantageScore’s scoring system the same category is considered “highly influential.”

Credit scoring models are built to reward consumers who maintain lower levels of debt and, conversely, penalize those who do not. While all debt has the ability to lower credit scores to some degree, credit card debt is by far the most problematic. Credit card debt is unsecured meaning there is no asset to act as collateral protection the lender. As such, credit card debt is a riskier type of credit to extend.

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John Ulzheimer

12 Comments

  • I have been carrying balances for years. I am now 72 years old. I have paid my minimum due on time which paid my interest for most. I had a high interest loan that I took out 6 years ago and paid it off. Took out another one with the same company. I felt I gave them more than enough money in interests paying off the old and new loan. 3 months ago I ran into financial stress. Paycheck to paycheck. I stopped paying my credit cards and the loan. A so called attorney sent a letter. The loan is 3000 the interest is 3000.

  • I agree with Dr. Breeder. I agree. Credit should be based on how you pays your bills period!! All of these other variables are impossible to keep up with and most people don’t even know about them. Scoring credit needs to be simplified because the current system isn’t fair. I pay all of my bills on time but my friend who filed bankruptcy has a higher credit score than me because of credit card balances. Go figure!!

  • Credit shot up 32 pts just for being added as an authorized user on an established card higher limit card and it has 0 Utilization at the moment. It works!

  • I’ve been following your credit advice for several years. My spouse and I have been able to progress from a very poor 480 to now consistently grounded at 802. You have a few recommendation on how to get to 850 Club. We are moving I that direction Thank you for this live changing program.

  • This is so much B.S. I don’t even know where to begin! We’ve carried high credit card balanced for years. The get used mostly for travel where I work and there is, by nature of how reimbursement program works (or doesn’t) a balance that can get quite substantial. We were NEVER penalized for years but in the last couple of months found ourselves with a low credit scores. It’s like we’re playing a fricking game where the rules constantly change! I don’t appreciate or understand it. We recently paid our house off and THAT still isn’t even acknowledged. We make our payments on time to all creditors! I donakt have enough bad things to say about credit bureaus!

    • I agree. Credit should be based on how you pays your bills period!! All of these other variables are impossible to keep up with and most people don’t even know about them. Scoring credit needs to be simplified because the current system isn’t fair. I pay all of my bills on time but my friend who filed bankruptcy has a higher credit score than me because of credit card balances. Go figure!!

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