A survey found that 43 million Americans carried a credit card balance to help improve their credit score. But there’s a big problem with that strategy: carrying a balance does not help your credit score! This is one of the most popular myths with credit and something you should avoid. Follow along to learn why you should aim for a $0 balance every month and the best steps you can take to build or maintain an excellent credit score.
Do Not Carry a Credit Card Balance
According to a CreditCards.com survey, 22 percent of respondents carried a credit score because of the mistaken belief that carrying a balance helps your credit score. I can’t tell you how many times I’ve come across this myth, but we need to stop it once and for all. Carrying a balance does not help your credit score. While keeping your credit card balances below around 10 percent to 20 percent of your total available credit limits is essential for a healthy credit score, the best credit card balance for your credit score is zero.I pay off my credit cards in full every month to avoid paying interest, but a recent month gave me a big wake up call on just how much your credit card balances influence your credit score. For just one month, I had balances about double my usual due to a few household projects. My credit score dropped by about 80 points even though my utilization was still below five percent. That took my score from around 830 to around 750. Paying off those balances to zero brought my score right back up to the 830 range. It is evident what happened and how much it impacted my credit score.
