How your credit card balance can affect your Credit Score

Ever wondered if the reason for your bad credit score is the amount of credit card balance that you use? You might think that your credit card balance doesn’t affect your credit score as long as you pay the bills on time but you are absolutely wrong.

According to CreditRepairXP, your credit card balance greatly impacts your credit score and pays an important role in you achieving a bad or a good score.

We have provided you a detailed review of how this works so go ahead and learn for yourself how a high credit card balance can ruin your chances of getting a credit or loan.

What is a Credit Score?

A credit score is a reflection of your credit history and depends on the information provided on your credit report. Your credit score is mainly made up of credits, loans, credits cards, accounts, bill payments, etc. and if you miss on any of these things, your credit score is bound to drop by a great deal. Each of the above-mentioned factors have a specific weight in calculating your credit score:

  • Payment history is 30% of your score
  • Level of debt is around 30% of your score
  • Length of credit history is 15% of your score
  • Inquiries and mix credit are 10% each

How does high balance affect your score?

A credit card utilization pays an important role in determining if you are going to end up with a good score or not. If your credit utilization is low, it can really boost your credit score as it displays that you are a responsible credit card holder. So the lower your credit card balance, the higher your credit score would be.

A high credit card balance can lower your credit score greatly so make sure you never let that happen. What is the best credit card balance? It is $0 but that is only possible if you never use your credit card which is a difficult possibility. So make sure that your credit card balance is always less than 30%, if your credit card balance is more than this then you would notice your credit score suffering. What is a 30% balance? If you have a credit limit of 3000 then your credit card balance should either be 900 or lower.

It is easy to maintain a 30% balance, just pay your bills on time and don’t purchase a lot of stuff together.

Now, you might think that if you pay off your high credit card balance on time, then it shouldn’t affect your chances of getting a credit right? But that is not how this works. Once you have a high credit balance, it would be documented on your credit report and when the lenders and credit issuers check your report, they won’t know how quickly you paid off the balance. All they would see that at one point of time you had high credit card balance, so it would be better to avoid any such opportunity and keep your credit card balance always lower than 30%.