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by misaelm 4291 days ago
It's hard to know exactly goes into the credit score calculation since the algorithm is proprietary but, anecdotally, you can carry a small balance (e.g. <10% of your credit line) without it having a negative impact on your credit score.
1 comments
Jtsummers 4291 days ago
Yes, but you're paying interest. Again, anecdotally, I've never carried a balance. I've had two loans (student loans, paid off; auto loan, almost paid off) and never carried a balance on my CCs, my credit scores (across all three) are fine. It doesn't make sense, to me, to pay more interest than you have to on something you can afford to pay off (the auto loan is only still around because I'll lose another $100 to interest over the last year of the loan, and would rather keep my cash on hand in case I need it for medical or other emergencies).
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misaelm 4291 days ago
Not necessarily. For FICO scoring purposes, you may carry a balance and still never pay a dime in interest: FICO considers your balance at the end your cycle, not the balance after your due date.

For example, if I have a balance of $800 when my statement was generated, my bank is going to report that $800 to the credit bureaus and FICO will calculate my credit score accordingly. So, for this cycle at least, it doesn't matter that I pay in full before my due date (thus avoiding any interest expense), my credit report will show an $800 balance on my account. This is why it's more likely to experience big month-to-month jumps in your credit score when you have fewer accounts/lower credit lines.

I do agree with you, I think that not carrying a balance doesn't have any negative impact on your credit score.

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Jtsummers 4291 days ago
I think there may have been some confusion on my part. When I hear "carrying a balance" I think "not paying the bill in full each month". From what you just wrote I don't think you're talking about what I imagined. If that's the case then my apologies. I just meant that you shouldn't carry a balance over each billing cycle (which would accrue some interest) which is advice that I've seen people give before.
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