Financial Myths: Carrying A Credit Card Balance

We’re starting a new series this week on common financial myths; those stubborn urban legends, second hand stories, and tips passed on from a friend who heard it from good authority. A lot of these are harmless but we’ve collected the ones we hear about most often that can actually set you back if you follow the well-intentioned, but still wrong, advice. First up – that carrying a balance on a credit card will improve your credit score.
This myth feels true. Of course credit card companies want you to carry a balance, that means you’re paying interest and they’re making more money. So of course they raise your credit score if you do it, right? Nope.

The credit bureaus don’t publish the formulas they use to calculate credit scores but we do know the basics and carrying a balance just doesn’t help. The best way to improve your credit score, or keep it high, is to use credit responsibly. That means paying on time, and in full, every time. It’s true for car loan, your student loans, and your credit cards. In fact, carrying a balance costs you money in interest payments and ultimately probably lowers your score. Want to know why? Read the full article here.