Does Carrying A Balance Help Build Credit? (Myth)

image- Aug 27, 2018Building 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 him 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. These 5 factors are how credit scores are calculated (you can read about them here). 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 from 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.

Did you like this post? Get one every week to your inbox by signing up for our weekly credit tips here!

Was this article helpful?

image
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.

Leave A Comments

This site uses Akismet to reduce spam. Learn how your comment data is processed.

1 Comment

  1. My utilities bills will decrease my credit

    Reply

Recent Posts

Follow us

image

Click here to subscribe to
our WhatsApp channel

Todays
best offers

image

Chase Ink Business Preferred

Earn 100,000 points after $15,000 spent within the first 3 months.

more info
image

Chase Ink Business Unlimited

Earn $750 (75,000 points) after $7,500 spent within the first 3 months. Intro 0% APR for 12 months on purchases.

more info
image

JetBlue Card

Earn a total of 100,000 points after a total of $6,000 spent within the first 12 months. See offer details for full offer. Intro 0% APR for 12 months on balance transfers.

more info
image

Chase Sapphire Preferred

Earn 60,000 points after $4,000 spent within the first 3 months.

more info

You May Also Like

8 Actionable Tricks for Quick Credit Score Improvement

8 Actionable Tricks for Quick Credit Score Improvement

Ever seen a 4 year old do one of those “it’s not fair” tantrums? (No? Good for you…) What I’m gonna say may (or may not!) lead to a similar reaction, but don’t fret- it can be worked out! So, here it goes… Did you know that even if you never missed a payment your...

read more
Where Can I Find The Most Accurate Credit Scores?

Where Can I Find The Most Accurate Credit Scores?

What’s sweat-inducing, hair-raising and spine-chilling for men and women alike? Credit scores. Yep, those intangible & non-physical numbers that determine our lending options, insurance quotes, job opportunities and even the fact of having a roof over our head....

read more
Average Age of Credit History -True or False

Average Age of Credit History -True or False

If you ever reviewed your credit report using Credit Karma, Wallet Hub, Nerd Wallet, etc., you may have noticed that they all break down your credit history based on the average age of credit history taken from all your trade lines combined. For example, if you have a...

read more
The 5 Most Important Factors In A FICO Score

The 5 Most Important Factors In A FICO Score

The FICO score model is the mostly widely used scoring model. As per Fico, as much as 90% of lending decisions that are done using a scoring model, use the Fico scoring model. In this post we will discuss the 5 most important factors that Fico would look at in order...

read more
Why Are My Credit Scores Different?

Why Are My Credit Scores Different?

When people check their credit score, should it be by Credit Karma or on their Discover statement, etc., they look at the three-digit number. They take it as a fact that this is their credit score. Period. The same way they know their age and weight, they feel that...

read more
image

Download link sent
succesfully

Got it*please check your promotional inbox
image

Error sending download link

Try Again