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Does Carrying A Balance Help Build Credit? (Myth)

- Mar 20, 2022 Building Credit, credit1 comment

Many people believe that carrying a balance will help them build credit or up their chances of getting approved for a credit card. People think that if they pay interest then the bank is making money off them (that part is true!).  So if the banks are making money, then their pockets are like a gold rush for the banks, causing all of them to come running and approve them for credit cards. Therefore, even if these people can afford to pay more than the minimum payment due on their credit card bill, they will still go ahead and pay only the minimum amount due, thinking (falsely) that this is helping them build credit.

A Myth on Fire

Credit models look mostly at 5 factors. 

1. Timely Payments- 35%

2. Credit Utilization – 30%

3. Credit History – 15%

4. Credit Mix -10%

5. New Credit -10%

These 5 factors are how credit scores are calculated. Carrying a balance is absolutely not one of the 5 factors.  What is one of them is credit utilization. Credit utilization accounts for 30% of the FICO scoring model. Carrying a balance month to month may strongly affect your credit utilization, which may ultimately have a strong negative effect on your credit score.

So by carrying a balance on your credit cards, not only will it not help you build credit, but it actually may help you lower your credit score. And with a low credit score, you can pay the bank as much interest as you wish; you will still be a second class customer.

But the banks are making money off me!

It’s true if you’re paying interest the banks are making money off you. But that still does not up your chances to get approved for a credit card. 

If you already carry a balance on your credit card and go ahead and apply for a new credit card, the banks will see you as someone not able to afford to pay up your existing balance. They see you as still trying to rack up even more debt which ultimately raises the risk of default. So not only do they not smell cash, they smell default which will ultimately result in them losing money off you instead of gaining.


I have never seen that carrying a balance month to month helps anyone get approved for a credit card. If anything, I have only seen the opposite. I do recommend using your cards monthly but there’s no need to carry a balance and pay interest to make your account look profitable. Don’t do the bookkeeping for the bank, let them do it on their own. 

Frequently asked questions
What will improve my credit by a bigger percentage, if I pay down my account balances to zero, or leave a balance of 1-2%?
The best you can do for your credit is pay most accounts down to zero, and leave a few with a 1-2% balance
If I add more money to my monthly mortgage payments, would that help my credit score?
It may help you pay off your loan faster but it does not help in terms of building credit

Was this article helpful?

Sam Sam has nearly a decade's worth of experience educating his many readers on everything credit. Sam spends his days checking out credit cards for a full report, from the minute benefit details to the shebang of welcome bonuses. Plus studying the ins and outs of building proper credit. It’s his favorite pastime and he loves sharing it with others.

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1 Comment

  1. My utilities bills will decrease my credit


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