Having a credit card balance or paying in full: what’s best for your credit? | Credit card

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Having a balance does a disservice to your credit – it only accumulates interest charges. Here’s why having a credit card balance is a myth and what you can do to get a good credit score.

Does Maintaining A Balance Help Your Credit Score?

Having a balance does nothing to improve your credit score. In fact, it works the other way around, says Jeff Richardson, senior vice president of marketing and communications at credit rating company VantageScore Solutions.

Your balance against your credit limit on each card, or credit usage rate, can hurt your credit score if it’s too high. As a rule of thumb, keep your credit utilization rate below 30%, and less is better, says Richardson.

Keeping your credit cards active can also help your credit score. If you do not use your card and the issuer closes it, your credit may be affected as you lose payment history and available credit.

Even if an inactive account remains open, it might not be included in your credit score, says Rod Griffin, senior director of public education and advocacy for Experian.

“Credit scores require not only that you have the account, but also activity on the account to show that you can manage it well,” says Griffin.

However, actively using a credit card is not the same as carrying a balance. You can use your credit card, pay it monthly, and get interest-free credit benefits.

Should you pay off your credit card in full or keep a small balance?

Try to pay off your credit card monthly if possible. When you carry even a small balance, you owe interest, Griffin says.

“From a credit scoring perspective, there is no reason to keep a balance on a credit card,” he says.

Even if you pay off your card every month, don’t be surprised if your credit report still shows a balance.

Typically, your monthly bill statement balance is reported to the credit bureaus. You may be able to pay the balance before your statement date if you are concerned about the effect of the balance on your credit.

“Always try to pay in full,” says Richardson. “If you are renewing a small balance, as long as your credit limit is much higher than that balance, you are in good shape.”

How can a balance hurt your credit?

Amounts owed are one of the most important factors affecting your credit score, right after your payment history.

“The higher the balance, the greater the sign of risk,” Griffin says. “High balances are a strong indicator of risk that will lower your credit scores. “

And making minimum payments might get more difficult as your balances increase. If you don’t pay the minimum on time, you could owe late fees and hurt your credit score.

What Helps Your Credit Score The Most?

Here are some ways to quickly improve your credit score:

  • Reduce or eliminate credit card balances. Paying off credit card balances is one of the fastest ways to improve your credit score, Griffin says.
  • Make all your payments on time. Since payment history is the most important factor in your FICO score, regular, on-time payments will help.
  • Correct late payments as soon as possible. Credit bureaus don’t consider a late payment until you miss a full billing cycle, so you can make your payment a few days late before it shows up on your credit report.
  • Eliminate late payments. Ask your lender to remove a late payment from your credit report if you’ve caught up and your account is in good shape. You might be refused, but it doesn’t hurt to ask.
  • Use credit augmentation tools. Sign up for programs such as Experian Boost, which can add points to your credit score by counting utilities, streaming service, and cell phone payments in your credit score.
  • Monitor your credit history. Griffin cautions about forgotten cards with unpaid balances, which can go to collections and accumulate interest charges and fees. Check your credit report as often as you want without harming your credit score; free weekly reports are available through April 2022 on AnnualCreditReport.com.
  • Avoid closing accounts. The older your accounts, the better your credit score.
  • Vary your credit products. Another factor, credit mix, research account diversity to see how well you handle different types of credit. For example, your credit might improve if you take out a loan and have never had one.
  • Limit credit requests. Multiple inquiries about your credit report in a short window can lower your score. If you are considering applying for a mortgage or car loan, avoid further inquiries if possible.

Best credit cards to keep a balance

While a $ 0 balance is ideal, it’s not always possible. If you need to keep a balance, a credit card with an introductory 0% annual interest rate offer can help you save on interest as you pay it off. Consider these top rated 0% APR card options:

  • Bank of America Personalized Cash Rewards Credit Card: Get 0% 15-month introductory APR on purchases as well as balance transfers in the first 60 days. You will also get a $ 200 cash bonus when you spend at least $ 1,000 in the first 90 days.
  • Citi personalized payment card: You can take advantage of a 0% APR over 15 months on purchases and balance transfers. You pay no annual fees and you can earn 5% cash back up to $ 500 in the category you spend the most each bill cycle.
  • Wells Fargo Reflection Map: Take up to 21 months to pay off your interest-free balance with this card. When you make your minimum payments on time during the 18-month introductory period, you get an additional three months at 0% APR.


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