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Do credit card balances increase credit scores?

On Behalf of | Dec 20, 2021 | credit card debt |

Of all the dangerous and misleading myths circulating about credit scores, one of the most damaging involves your balance. Unfortunately, many people hold a mistaken belief that carrying a balance on a credit card can actually increase your score.

Interest-bearing balances actually have no impact on your score, though. Not only does it not improve your score, but it does not give you points with lenders, nor is it necessary to establish credit history. So just where did these rumors originate?

Diverse credit mixes and loans

Experian discusses what may have led to the widely spread misinformation mentioned above.  For example, they talk about how diverse credit mixes increase your credit score. However, this only applies if you make every payment on time and pay it in full. A “diverse credit mix” refers to having multiple different sources of financial obligation, such as paying rent, student loans, home loans and more.

Other forms of credit instead involve you paying off large balances in small increments. Again, though, this only increases your credit score if you make your payments on time. Paying back large amounts of credit card debt slowly over an extended period of time does nothing to help your score.

Pay your bills on time

Focus on remaining active and paying bills, too. First, note that it is perfectly fine to go even months without making a single charge. Experian states that the best credit scores often come from those who maintain 10 percent utilization of their credit card, i.e. only 10 percent of their maximum every month.

Thus, high interest is the only thing a high credit balance generates. You should focus on paying off your credit card and utilizing other methods of credit score growth instead.

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