Does carrying a balance help my credit score?

Ask the Experts: How long should I carry this balance?

We would like to pay off a purchase on a zero interest credit card and would like to know if there is a certain amount of time that we should wait in order for this credit purchase to positively affect our credit score? For example, if we pay it off in the next month after the purchase, would this show up on the credit report or should we wait four or five months? Thank you. –Erica

Hi Erica,

There’s a fairly common misconception that you need to carry a balance for a certain period of time in order to positively impact your credit score. The truth is that you do need to use credit consistently and wisely in order to build a positive credit history, but you don’t need to carry a balance.

As we’ve discussed elsewhere (including our spiffy new eBook Getting the Credit You Deserve), your credit score is a mathematical representation of your creditworthiness. In most major scoring models it’s determined by five main factors:

  • Payment history
  • Amount owed to creditors
  • Length of credit history
  • Amount of new credit
  • Types of credit use

Length of credit history refers to how long you’ve had your accounts, not how long you’ve been carrying a balance. Ultimately, the main purpose of credit reports and credit scores is to help future lenders understand how likely you are to pay back the money they’re considering loaning you. Paying them back immediately can only help you.

So if you’ve got the ability to pay off the interest-free account, do it today. You may want to check your contract with the lender first, just in the off-chance that there’s any language in there regarding fees or penalties for paying off your debt too soon. Otherwise, pay it off and be done with it.

Good luck!

That was brief. Let’s answer another question:

Does it make sense to borrow money to pay recurring bills (rent, utility bills) in advance on the theory that it frees up money later on? –Bryan

Hi Bryan,

The short answer is no.

The long answer is super duper no.

Unless I’m misunderstanding your question, the thought is that you would borrow money (presumably from a financial institution) and then use that money to pre-pay certain fixed expenses (such as your rent). Unfortunately this wouldn’t free up money later on, because you would now be paying back your loan (plus interest), rather than just paying your (interest-free) rent and utilities. This would cost you money and provide no additional financial flexibility.

So, again, super duper no.

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.