Is Carrying Credit Card Balances a Good Strategy to Increase Your FICO® Scores?
, by Tom Quinn
There is a lot of misinformation out there about the best strategies you can take to increase your FICO® Scores. For example, the recommendation that closing down credit card accounts will increase your scores or that an individual should never use credit if they want a higher score are in fact not true.
Another common misunderstanding is that making your minimum monthly payment on time and carrying balances from month to month on your credit card is a good idea if you are looking to build up your credit history and FICO® Scores. The underlying thinking seems to be that by doing this you are demonstrating the ability to use your credit and pay ontime .
If you think this is the case, you're definitely not alone. Check out this recent artice by personal finance expert Beth Kobliner, "Fact Check Finance: Having credit card debt can help raise your credit score."
Making agreed upon payments is always considered positive by FICO® Scores. However, FICO Scores don't take into account if an individual is carrying a balance from month to month. Doing so will not increase your FICO Scores and will likely cost you money by incurring expensive interest fees.
Keeping your balances relatively low in comparison to your credit limit is what FICO® Scores consider substantially when accessing your amounts owed.
Tom Quinn is the Vice President of Business Development for myFICO and has over 25 years of experience working with consumers, regulators, and lenders regarding credit related questions and initiatives.