Think Carrying Credit Card Balance Improves Credit Scores?

Davis Legacy Ventures


mastercards sticking out of someone's back pocket

Carrying a balance to help improve your credit score? You’re not alone.

But you might want to rethink the strategy.

More than 1 in 5 credit card users carry a balance or pay the minimum to credit card companies because they think it helps improve their credit scores. But carrying a balance is not one of the factors that go into creating a FICO credit score.

Payment history, amounts owed, length of credit history, credit mix and new credit are the only factors rating companies consider when determining credit scores.

Younger users are more likely to carry a balance, according to the report, with 28% of millennials continuing the myth. They are more likely to carry a balance due to a “function of inexperience and lack of financial education over the course of their lives”.

Credit card holders should focus on paying down their debt and lowering their credit utilization rather than carrying a balance.

About 42% of those surveyed said they pay a credit card bill late. From that group, 71% said they paid late because they either forgot, were busy and/or were traveling.  Paying the bill one or two days late won’t hurt credit scores.   However, being significantly late will.

With the popularity and availability of online banking, people really have no reason not to pay credit card bills on time.

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