According to a new report, 22 percent of credit card users carry a balance in hopes of improving their credit score. However, carrying a balance on a credit card is not one of the five main criteria for a credit score. Being closer to a credit limit due to credit card debt, however, can have a negative impact for individuals in Texas and across the country.
Carrying a balance on a credit card can have many unintended consequences for those using the balance to improve their score. For example, people can be hit with high interest as a result of their credit card balance. The average American carries a credit card balance of $6,375. Even if this did boost a credit score, the cost of the interest would outweigh any such benefit.
Debt-to-credit ratio is one of the main factors that is considered when coming up with a person’s credit score. The higher a person’s balance relative to the available credit, the lower this rate will be. History of paying credit card debt on time is another factor with which carrying a balance will not help.
People looking to improve their credit score should avoid trying to use unproven tricks, such as carrying a balance. Instead, they should focus on displaying good credit repayment habits over time. Those who need a fresh start due to too much credit card debt may need to consider filing a petition for bankruptcy relief. A Texas bankruptcy lawyer can help explain the process to those considering this step.