Debunking credit card myths: Does carrying a balance help my credit score?

Jan 11, 2021

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.

woman and baby with laptop and credit card
Photo by Cavan Images / Getty Images

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.

Related: Ten commandments for rewards credit cards

Bottom line

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.

The All-New United Quest℠ Card

WELCOME OFFER: Up to 100,000 bonus miles


CARD HIGHLIGHTS: 3X miles on United® purchases

*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.

Apply Now
More Things to Know
  • Earn 80K bonus miles after you spend $5,000 on purchases in the first 3 months your account is open. Plus, an additional 20K bonus miles after you spend $10,000 in the first 6 months
  • $250 Annual Fee
  • Earn 3X miles on United® purchases, 2X miles at restaurants, on select streaming services & all other travel, 1X on all other purchases
  • Earn 3X miles on United Airlines purchases
  • Earn 2X miles at restaurants and on select streaming services
  • Earn 2X miles on all other travel
  • Earn 1X mile on all other purchases
  • Each year, receive a $125 credit on United® purchases and two 5k-mile anniversary award flight credits. Terms apply.
Regular APR
16.49% to 23.49% Variable
Annual Fee
Balance Transfer Fee
Either $5 or 5% of the amount of each transfer, whichever is greater.
Recommended Credit
Excellent, Good

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.