So if someone has told you that carrying a small balance on your credit card will help your credit score. technically they are right because it can help your credit score but I want to be clear that carrying a balance and paying interest on it does not make sense in 2022.


Will Carrying a Small Credit Card Balance Help My Credit Score?

the same thing by not paying interest and helping your credit score as well. because your credit report doesn't care about how much interest you're paying on your credit cards they mostly care about your credit history your payment history and your credit usage.

meaning how much credit you're using versus how much you have available to you. so if you're paying interest on your credit card every single month just because you think it's going to help your credit score then this is completely false because you don't need to be carrying a balance every single month just to help your credit score out.

now the way i define carrying a balance is that every single month if your statement balance rolls around by a certain due date and you don't pay off that full statement balance then you are going to be accruing interest and that's going to be carrying forward every single month until you pay off that statement balance in full for a couple months in a row. so carrying a balance even if it's small let's say thirty dollars you're still going to be paying interest on that thirty dollars and what's the point in doing that if you don't have to because it's still going to help your credit score out the exact same way.

let's say that john has a statement balance of a thousand bucks and he decides to pay 900 of that thousand by the due date. so what's gonna happen is now he's carrying over a hundred dollars into the next statement.

but he's now paying interest on the 100 that was leftover plus all of the new purchases going forward until he gets that statement balance paid off two months in a row.

so even though the low balance will probably help his credit score he's now paying interest because he didn't pay off the statement balance in full by the due date.

let's say that another guy named tim has the exact same statement balance of a thousand dollars and he ends up paying the full thousand dollars by the due date but he spends another hundred dollars before the statement closes.

so what's now going to happen is that 100 is going to carry over into the next statement so technically he's getting the same credit report benefits as john over here but he's not paying any interest because he paid off his statement balance in full by the due date.

that's the big kicker here is that you can have the exact same amount of money carry over into the next month but the difference is is whether or not you're paying off that statement balance in full every single month.

so if your goal is to always keep a low balance every single month to help your credit out then that is great. just make sure that you always pay off your statement balance in full every single month that way you're not accruing any interest.

now i'm going to give you an example here of how i pay off my credit cards to keep a low balance and you guys can do the same thing.

now every single month my credit card is due around the 25th so what i do is i make sure to pay off that entire statement balance in full by the 25th and then every single month the statement closes around the first of the month.

so i know that as long as i get my balance down as low as possible by the end of the month then that is the data that's going to be reported to the credit bureaus.

so let's say i had five hundred dollars left over that was going to carry over well what i could do by the end of the month is just pay down that 500 bucks maybe 499 if i wanted to and i could carry over one dollar into the next month and that would be reported to the credit bureaus as having a very low balance compared to what my limit is.

so that's obviously going to help my credit score and that is exactly how i do it in my own personal life with my credit cards.

because what a lot of people don't understand is that you do not have to pay off your credit card just once a month you can technically hop online and make as many payments as you want throughout the month and get that balance down to exactly where you want it to be before that statement closes.

because like i said once the statement closes and it rolls into the next month that information is what's given to the credit bureaus.

so obviously if it's 30 bucks when that closes then 30 bucks is what's going to be reported so just get that as close as you can to when that statement closes and that's the information that they're going to be pulling from.

So now i think you clearly understand the point Will Carrying a Small Credit Card Balance Help My Credit Score?

Tags
Previous Post Next Post