Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app

Why Keeping a Balance Won’t Improve Your Credit Score

July 02, 2018
improve credit score, raise credit score

  • Carrying a balance could actually hurt your credit
  • It’s best to pay off credit card balances as quickly as you can
3 min read

No, keeping a balance on your credit card won’t help you improve your credit score or raise your credit score.

That’s a common misconception held by nearly a quarter of all credit card holders, who believe carrying a balance will help improve their credit scores, according to a new study by

That misunderstanding is even greater for millennials, nearly a third of whom believe carrying a balance improve their credit.

Listen up, it’s simple: It’s usually better to pay off your credit card balances as quickly as you can.

Not only will that improve your credit score, it will save you money. Credit cards typically charge a high rate of interest, on average about 16.71%. That amount is added as a percentage of your outstanding balance every month you’re not paid off.

What’s a balance?

A balance is any unpaid amount on your credit card, that carries over from one month to the next.

The average U.S. consumer carries a balance of $6,354 on credit cards.

What’s a credit score?

A credit score is a point-based score developed by a company called Fair, Isaac Co. It’s sometimes referred to as a FICO score. It uses credit history data compiled by credit bureaus Experian, Transunion, and Equifax. Your credit usage information is regularly transmitted to these three agencies.

A credit score can range from 300 to 850. The better your credit, the higher your score. Perfect credit is 850.

How is my credit score determined?

Your credit score is determined based on your use of credit.

The most important factor is how well you handle credit, which chiefly means how timely your payments are. If you are late with payments or have stopped paying a loan, that’s going to have a negative impact on your credit.

If you fail to make a payment within 60 days of your bill due date, that will be reported to a credit bureau, which will hurt your credit rating, according to the report.

The other key thing that determines credit score is something called credit utilization. That’s essentially the percentage of the entire amount of credit that you have available to you,  that you’re using at any given time.

Say you have credit lines worth $10,000, if you’re close to maxing out your lines, that’s likely to have a negative impact on your credit.

What else influences my credit score?

Another thing that influences your credit score is the variety of loans you have.

Generally speaking, the more kinds of credit you can handle well, the higher your score is going to be. For example, if you’re managing to make timely payments on two credit cards, a car loan, and a mortgage simultaneously, your score is likely to be better than someone with just credit card loans.

Other things that influence your credit score include the length of time you’ve had credit, and whether you’ve applied for new lines of credit. The more frequently you apply for credit, the more that will affect your score.

Why does good credit matter?

Your credit score determines the rate you’ll get on everything from credit cards to car loans and mortgages. The higher your rate, the more you’ll pay, particularly for installment loans like cars and mortgages.

Women more likely to make late payments

It turns out that women may be more likely to make late payments on their credit cards than men.

The top reason, according to the survey, might be economic. Women earn nearly 20% less than men, according to data from Pew Research.

Ready to get your finances in order?

Stash lets you save and invest while building smarter money habits.

Investing, simplified

Start today with as little as $5

Get the App

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

Next for you
Your Financial Life Checklist

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
market news pop culture politics Careers Retirement

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit