Business & Finance Credit

Does Having a High Balance on a Credit Card Hurt?

    Account Balance

    • The Fair Isaac Company is the creator of the FICO score, also known as the credit score. According to Fair Isaac's formula, 30 percent of your credit score is based on the amount that you owe. All else being equal, the more that you owe on your credit cards, the lower your score will generally be. Since credit card companies typically only report your balance once per month to the credit reporting agencies, having a temporarily high balance on your cards may not have any effect at all on your scores. However, if you keep a high balance for one month or longer, you can usually expect a drop in your scores.

    Credit Utilization

    • Another important component of your overall credit score is your credit utilization. Credit utilization refers to the percentage of your total available credit line that you have used at any given time. If you run up a high balance on your credit cards, your utilization rate will also rise, dropping your score. The Fair Isaac Company factors in your credit utilization in the same 30 percent category as your account balance. If you approach a 100 percent utilization on your credit cards, your FICO score will typically drop around 25 to 45 points, according to Bankrate.

    Interest Charges

    • In addition to hurting your credit score, having a high balance on your credit cards can cost you more money. If you don't pay off your credit card balance by the monthly due date, you will have to pay interest on the amount of your outstanding balance. If you carry a high balance, that can amount to a significant amount of money, as many credit cards charge interest of over 10 percent annually.

    Need for Credit

    • If you don't anticipate a need for any future credit, you can avoid most of the damage that a high credit card balance can cause. If you can shop around and find a credit card offering a zero percent interest rate, you will not have to worry about paying interest on your high credit card balance. The attendant drop in your credit score may have no bearing on you if you don't need any future credit.

SHARE
RELATED POSTS on "Business & Finance"
Have You Heard About the Credit Card Bill Stimulus Package and How it Can Help You?
Have You Heard About the Credit Card Bill Stimulus Package and How it Can Help You?
Credit Repair Service - Is it For You?
Credit Repair Service - Is it For You?
The FTC Provides Resources To Help Consumers Get Out Of Debt
The FTC Provides Resources To Help Consumers Get Out Of Debt
The Short Cut to Credit Card Success - How Credit Comparison Tables Can Half Your Research
The Short Cut to Credit Card Success - How Credit Comparison Tables Can Half Your Research
Fix Your Credit Report Errors
Fix Your Credit Report Errors
Credit Cards with Zero Interest
Credit Cards with Zero Interest
How Business Credit Can Help in Growth of Your Business
How Business Credit Can Help in Growth of Your Business
The Mystery of Credit Card
The Mystery of Credit Card
A Bond Co-Signer's Rights
A Bond Co-Signer's Rights
Canceling Credit Cards and Credit Scores
Canceling Credit Cards and Credit Scores
Most Common Credit Repair Myths Debunked
Most Common Credit Repair Myths Debunked
Credit Counseling - Not Because You're Crazy, Either
Credit Counseling - Not Because You're Crazy, Either
Credit Cards For Poor Credit
Credit Cards For Poor Credit
Credit Card Approval - Some Simple Hints
Credit Card Approval - Some Simple Hints
Low Interest Balance Transfer Credit Cards - Is it a Great Deal Or is it a Trap?
Low Interest Balance Transfer Credit Cards - Is it a Great Deal Or is it a Trap?
Instant Approval Credit Cards And Why They Are Highly Beneficial
Instant Approval Credit Cards And Why They Are Highly Beneficial
Credit Card Debt Relief and FICO Scores
Credit Card Debt Relief and FICO Scores
The ‘80/20’ Rule in Ghana’s Banking Industry, is it Helping Us?
The ‘80/20’ Rule in Ghana’s Banking Industry, is it Helping Us?
Your Credit Card & the Interest Charges - Do You Really Understand the Interest Calculations?
Your Credit Card & the Interest Charges - Do You Really Understand the Interest Calculations?
3 Credit Mistakes That Can Ruin Your Credit Fast
3 Credit Mistakes That Can Ruin Your Credit Fast
How to Get a 740 Credit Score
How to Get a 740 Credit Score
Your Credit Report and Credit Score Explained
Your Credit Report and Credit Score Explained
Debt Settlement Claims - Take All Big Statements With a Pinch of Salt
Debt Settlement Claims - Take All Big Statements With a Pinch of Salt

Leave Your Reply

*