Debunking credit card myths: Does carrying a balance help my credit score?
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Editor’s note: This post has been updated with new information.
We talk about travel credit cards quite a bit here at TPG. Applying for and utilizing these cards strategically can unlock incredible travel experiences like premium class flights or luxurious hotel rooms. However, there are a number of misconceptions out there when it comes to credit cards, so we’re debunking some of these myths in a series of posts.
Want more credit card news and advice? Sign up for TPG’s daily newsletter
Myth: Carrying a balance helps my credit score
When a credit card issuer is considering whether to approve your application for credit, your credit score is a critical component in the decision. This number is a reflection of how well you can manage any type of credit that has been extended to you, including things like mortgages and home equity loans.
A common misconception out there is that issuers want to see you carrying balances from month to month, as it shows that you are using your cards and could handle new lines of credit. While it’s true that issuers like to see that you use your card each month, you don’t have to hold a balance (which racks up interest) to accomplish this. This myth unfortunately leads some cardholders to not pay their statements in full so as to leave some balance on each account.
This thinking follows some flawed logic, as it assumes that issuers can only see balances past your statement due date. In reality, credit card companies report your statement balances to the major credit bureaus every month. So even if you pay those off each month, the credit bureaus will have a record of you using your card.
For example, I have auto-pay set up my accounts. Every month, I automatically pay the full statement balance on the payment due date. However, because the statement balance is still being reported to the credit bureaus each month, card issuers still see that I am using the card without carrying any balance over to the next month. There’s simply no need to leave any of my balance unpaid.
Remember that not paying your statement balance in full can result in interest charges that can negate the value of any points or miles you’re earning on the card.
Understanding the factors that make up your credit score can be a bit challenging, but it’s critical to avoid making silly mistakes. In the case of today’s myth, simple confusion around how your balances are reported to the credit bureaus may cause cardholders to not pay balances in full each month, thinking that such activity can improve their score.
In reality, it probably won’t impact your score significantly but will result in unnecessary interest charges. As always, we strongly recommend that you pay your balance in full every month, and hopefully this post has helped at least some of you recognize that carrying balances won’t improve your score!
Additional reporting by Madison Blancaflor.
Featured image by Hero Images / Getty Images.
Welcome to The Points Guy!
Earn 90,000 bonus miles and 10,000 Medallion® Qualification Miles (MQMs) after you spend $3,000 in purchases on your new card in the first three months of card membership. Offer ends 11/10/2021.
With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.
- Limited Time Offer: Earn 90,000 Bonus Miles and 10,000 Medallion® Qualification Miles (MQMs) after you spend $3,000 in purchases on your new Card in your first 3 months. Offer expires 11/10/2021.
- Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide, including takeout and delivery and at U.S. supermarkets.
- Earn 1X Miles on all other eligible purchases.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. *Payment of the government imposed taxes and fees of no more than $75 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights.
- Fee Credit for Global Entry or TSA Pre✓®.
- Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees