This is one of the most dangerous credit rating myths.


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Understanding how to get a good credit score is crucial for everyone, as this score affects so many aspects of your financial life.

Most people or companies you want to do business with will check your credit and make decisions based on how high or low your score is. So many more doors could be opened to you if you have good credit.

Unfortunately, people sometimes believe the wrong things about how to get good credit. And there’s one particularly dangerous myth that could end up costing you dearly if you fall for it.

You Can’t Afford To Fall For This Lie About Getting Good Credit

One of the biggest credit score myths – and one that you absolutely cannot afford to believe – is about credit cards. Specifically, many people have the misconception that you need to have a balance on your credit cards in order to build up a good credit history.

Now, this myth is somewhat grounded in truth. The reality is that you have to borrow money in one form or another to get a good credit rating. And for many people, having and using credit cards is a great way to build a credit report that earns them a competitive score.

When you use your cards and pay them on time, this is reported to the credit bureaus who keep all your data. The positive payment history you develop shows that lenders can trust you and this has a big impact on your credit score since payment history is the most important factor in determining it.

However, just because you have to use your cards doesn’t not means you have to carry a balance from month to month. It is perfectly acceptable to charge items to your cards and pay the statement balance in full.

Why having a balance isn’t necessary – or desirable

Having a balance on your credit cards is not necessary to build credit. In fact, it could backfire if you let your balance get too high relative to your credit limit.

Indeed, the second most important criteria used to determine your credit score is your credit utilization rate. It is the ratio of used credit to available credit. If you charge too much on your cards, you will end up with a high usage rate. Anything over 30% hurts your score. And ideally, you will have an even lower ratio to increase your score.

If you have a large balance on your cards, your credit usage could easily be well over 30%, resulting in a worse credit score than you would otherwise have.

If you have a balance, you will also be locked in paying interest on it. And credit cards have very high interest rates, which could cost you a fortune. One of the main reasons for trying to get a good credit score is to avoid having to borrow at high rates.

So by holding onto a balance to try and improve your credit score – and forcing yourself to cover expensive finance charges in the process – you’ll ensure you’re paying more than you need to borrow when you avoided that fate was the reason. why you tried to get good credit in the first place. There’s no reason to, so don’t buy into the myth that a credit card balance is necessary or desirable to build credit.

Check out The Ascent’s best credit cards for 2022

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