Will Carrying a Balance on Credit Cards Help My Credit Score?

Paying credit card bills in full every month won't hurt your credit — and it's the most economical way to use plastic.
Bev O'Shea
By Bev O'Shea 
Edited by Kathy Hinson

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Ever heard that carrying at least a small balance from month to month on your credit cards is good for your credit score? That's not true, but it's a persistent credit myth.

The truth is that paying on time, every time, is what's good for your credit — and paying in full is the most economical, because it lets you avoid interest.

Here's what you should know about managing your payments to protect your credit.

You do need to use credit

To maintain or build your credit, you need to consistently demonstrate that you repay borrowed money as agreed. One way to do this is to use a credit card regularly, then pay your bill on time.

Focus on never missing a payment (on any bill), because payment history has the biggest influence on credit scores. A misstep on this credit scoring factor can really hurt.

Does spending more money build credit faster?

It's important to put at least some of your spending on a card from time to time, but spending more will not benefit your score. Aim to use no more than 30% of your credit limit on any of your cards, and less is better. That's because the second-biggest influence on credit scores is credit utilization — the portion of your credit limits you use.

To keep your credit utilization low:

  • Sign up for balance alerts via text or email from your credit card issuer so you can stop using a card if the balance gets close to 30% of the limit.

  • Consider making several payments throughout the month to keep balances low.

  • If your credit is good or your income is up since you applied, ask for a higher credit limit. This will lower your credit utilization by bumping up your total credit limit, as long as your spending stays the same.

  • Think twice about closing old or little-used cards, because they contribute to your overall credit limit. Your credit utilization could shoot up due to the loss of available credit from a canceled card.

  • You could also increase your available credit by opening a new credit card, but it's important to research the best credit card for your financial needs before applying.

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Carrying a balance is costly

If you don't pay your credit card bill in full and instead carry a balance, you're not helping your score — but you are paying interest. FICO, which produces the most widely used credit score in the United States, doesn’t award extra points for carrying a balance month to month. Neither does VantageScore, its competitor.

In fact, if you get into the habit of paying less than the full amount, you could hurt your credit score if your balance creeps up.

It's smart to keep your overall financial picture in mind when deciding whether to do something for the sake of your credit score. Chasing a few points is seldom a good idea if it’s going to cost you money in interest.