Carrying a Credit Card Balance Does Not Help Your Credit Score

Your credit score is one of the most important financial factors. It is even more important if you’re into credit card churning. You need a good score for credit card companies to approve you for new credit cards. You can find out more here about credit scores, and what to do to improve yours or how to start from scratch. But many people do not check their scores, or follow bad advice and fall for myths that are actually hurting them.

One of those myths is that if you carry a balance on your credit card is a good thing. Many consumers don’t pay their entire credit card bill each month because they think carrying a balance will help their credit score. Based on a creditcard.com survey, 22 percent fell prey to a persistent misconception that carrying a balance helps your credit score.

You should always pay your bill in full when possible, unless you have a 0% APR for a certain time. The ratio of the amounts you owe to your overall available credit limit is an important factor. It accounts for 30 percent of your credit score. 

Not paying your cards in full doesn’t just hurt your credit score and your ability to borrow, but it also costs you money each month. Credit card debt is a very high interest loan, so it should be the first to pay back.

Other Common Credit Score Mistakes and Misconceptions 

One common mistake that people make when it comes to their credit score is not checking it regularly. It’s important to check your credit score at least once a year to make sure that everything is accurate and that there are no errors that could be negatively impacting your score. You can get a free copy of your credit report from each of the three major credit bureaus (Experian, Equifax, and TransUnion) once a year at annualcreditreport.com.

Another misconception is that closing old credit card accounts is good for your credit score. In reality, closing old credit card accounts can actually have a negative impact on your credit score. This is because the length of your credit history is an important factor in your credit score, and closing old accounts can shorten your credit history. Instead of closing old accounts, it’s better to keep them open and use them responsibly.

Some people also believe that applying for new credit cards can hurt their credit score. While it’s true that applying for new credit can cause a temporary dip in your credit score, it’s not necessarily a bad thing. You can get a big signup bonus and with the added credit limit, your score will actually improve in the long term.